I say keep the 800MHz G4
I'm also using an iBook in college, but it's the model they had out when I started in 2002, the 800MHz G3. It still provides everything I need to do.
So, I say that you should definitely keep your new iBook. I don't think the money you'd lose reselling and repurchasing the 1.2GHz version would be worth the improved performance.
However, I do recommend that you upgrade the RAM. You'll hear everywhere how OS X loves all the RAM it can get. This is true, that will make a huge difference in the performance of your machine. You can get extra RAM from 3rd party vendors and save a lot of money from what apple charges. I got my extra RAM (512MB, which is what I'd recommend for you, too) from
http://www.18004memory.com and had no problems. A site where you can compare prices is
http://dealram.com
Additionally, I would also invest in an Airport Extreme card for your iBook. My campus has wireless internet available in the library and other places on campus, and it really comes in handy. If you go to
http://store.apple.com and then click on the "Education" link along the right side of the page, you can find the Apple Store for you're school where you can get the airport card with an educational discount ($69).
Basically, I think the 800MHz G4 iBook with 512MB of extra RAM installed would be faster than the 1.2GHz version with default RAM.
Enjoy your computer,
Greg