I have the exact same MacBook model and the 250GB hard drive upgrade gave it a whole lot more "snappiness". Newer drives with higher capacity and thus higher data density are faster than these "old" 60GB ones.
As for the RAM, a bit over 3GB is the maximum addressable (though System Profiler reports 4GB if you put in 2x2GB), but by putting in one 1GB and one 2GB module, you lose the dual-channel mode. The speed loss, though is only marginal and so I went for the maximum RAM. Hm, thinking about it, I believe by putting in two 2GB modules you would retain dual-channel mode and really max out the RAM to the three point something possible... and looking at the prices.
I'd say, putting in two 2GB modules isn't really expensive and thus worth it. As for the HD, put in as large an HD you can afford and you'll be happy. 🙂