In my ideal world, I’d have two 30″ Apple Cinema Displays, but my less than ideal world ain’t so bad either. My souped-up 24″ iMac serves me well for my day to day work, quite well indeed.
I’m positive that my productivity gains are large – I always have emacs open with at least 4 frames, or eclipse with several views open without anything important having to stay annoyingly minimized. I also have a browser open with lots of tabs, a bunch of terminals open with iTerm, and a bunch of other what-nots, and managing all this is easy. This multiple desktop manager makes it even easier. Finally, if all those windows distract you, use Think!
Anyway, if you want a quick and relatively cheap way (in the long run) to become more productive, get a large screen monitor. Or three.