Upgrading your RAM, will I'm sure give you a improvement in your performance. As to what RAM you will need to purchase will depend on what motherboard you have in your system cruical memory advisor tool or system scanner click here should get you sorted out with the correct memory for your system. They also guarantty that it will be compatable with your system.
It shouldn't set you back to much depending on how much you go for and what memory you require.
As far as extra space goes you can pick up hard drive fairly cheap now heres a list from ebuyer you can get a 80gig one for just over £30 click here
As to if you could upgrade your processor or not will depend on the motherboard you have in your system. I would think thou that you would probably need to upgrade your motherboard as well.
Hope that helps