In any case, either an OS or RAM upgrade would be completely dependent on what you plan to use the machine for. If you're just opening up Safari or iTunes it likely won't make a difference.
If you're looking to have a good multitasker, you'll need ram. Likewise, if you want some Screen Sharable, Quick Look capable, Time Machining goodness you'll need teh New Cat.
If you need it, buy it. If you want it and have cash to spare, well if you have enough cash for extensive upgrades like these the advisable thing to do would be to trade 'er in and get a shiny new MacBook or something. Regardless, if you want it on THIS computer just do it. You'll have more luck justifying than we will.