I would think so. Are you willing to throw $200 at it for a new HD and Ram and not feel bad about using that toward a new machine instead.
Let's say you take that $200 you would have used for upgrading...couple that with $600 you would get selling the Macbook on craigslist. You are already $800 toward a $1500 machine. I think you have a solid machine, but I like you, hate throwing money at upgrades to put off an inevitable purchase when you could have just been using that money to buy a new machine. It's a tough decision.