I don't think there's ever a downside to adding more RAM.
You do know that there's two different RAM slots, each taking a different type of memory, right?
The SO-DIMM slot is easy to get at, just the metal shield on the bottom.
The other, which takes a full-size SDRAM PC-2700 stick, requires pulling the bottom case completely open. You do have to redo the heat sink compound if you remove the bottom case.
Anyway - both sticks can be 1 GB, to give you a max of 2GB total.
One of your sticks is 512MB, so if you think you are installing a 1 GB stick, then you would be pulling the 512MB. If you only want to get 1 1GB stick, then get it for whichever slot has the 256MB stick, and replace THAT one, so you end up with 1.5GB. Does that make sense to you?
Likely, the 256 stick is the internal (factory) stick, which is the SDRAM stick (and quite a bit more challenging to replace)
The system will work more smoothly with more RAM (might feel faster, too), but it's still the same processor.
Upgrade to 10.5 if you like.