Yo, the main reason people buy Mac Minis (which aren't many in the store) is that they already have existing PC hardware around their house, and want to use that stuff to save them money. In the long run, the iMac is a lot faster and a lot better to use for not much more money.
You also said watching video.. and I assume the cost of the Mini doesn't include one of the monitors, which of course you get with the iMac. Though you have the bonus of plugging the headless Mini into a TV, you can do this with the iMac as well, and very soon you'll be able to send stuff wirelessly to your TV, mirror your display on the TV through Apple TV.
Of course I'd also recommend AppleCare, because for the iMac, while it's a great solid machine, repairs are a little spendy because it's an all in one, and One to One also to transfer the data off your old MacBook, and you get a years worth of personal training sessions to teach you the ins and outs of the Mac.
