Memory Upgrade?

120GB is plenty of free space. A SSD would be faster than a HDD, however.

Depending on your typical workload, it may help. To determine if you can benefit from more RAM, launch Activity Monitor and click the System Memory tab at the bottom to check your page outs. Page outs are cumulative since your last restart, so the best way to check is to restart your computer and track page outs under your normal workload (the apps, browser pages and documents you normally would have open). If your page outs are significant (say 1GB or more) under normal use, you may benefit from more RAM. If your page outs are zero or very low during normal use, you probably won't see any performance improvement from adding RAM.

Mac OS X: Reading system memory usage in Activity Monitor

If you're having performance issues, this may help:

Performance Tips For Mac OS X​

 

Only you can decide if you need more storage, but a memory upgrade is highly recommend...I'd take it up to the Max.

Corsair's online Memory tool will identify what you can use in your Mac.

http://www.corsair.com

Just hit the memory upgrade tab whist on your Mac.

 

As mentioned, Activity Monitor is better at showing you RAM usage, as explained my Mister GGJstudios.
Open Activity Monitor and go to the System Memory* tab and look for Page Outs and Swap used and report back.

Using Activity Monitor to show you CPU and RAM usage​

* Mac OS X: Reading system memory usage in Activity Monitor​

Upgrading RAM in MacBooks and MacBook Pros​

 

Well from that you can see that you only have 26MB free RAM. Thats nothing. Upgrade it, you will need 200 pin DDR2 667MHz RAM. Your model supports up to 6GB of RAM, 1 x 4GB and 1 x 2GB sticks. Your MacBook will feel astonishingly faster with more RAM.

Also From your screenshot you can see that your CPU is being used a alot. You said you are using VLC, were you playing a hd video at the time?
Please post a screenshot from the activity monitor. Select the RAM tab aswell as choose all processes at the top right and click on the CPU bar to make sure highest numbers are at the top.

 

OP I think you might need to bite the bullet here, that money you plan to spend on memory and an SSD might be better spent on a new MBP(or at least a 2012 refurb). Cause 667MHz ram if you can find it will cost a bit and even then it's still slow and limited in size. And there's not guarentee an SSd will work properly in your MBP, I know I had issues with my late 2008 model MBP.

My suggestion is sell your macbook and get a new one, you wont need to upgrade the ram or hdd and it'll be exponentially faster than what you have now.

Food for thought.

 

Thought you are installing a 4GB and 1GB stick?
The MB wont feel faster directly, the ram increase will stop it from slowing down over the time you are using it.
That MB should be fine for some more time, they are very good machines and if you don't need the power of the newer ones there isn't really a point in upgrading.

 

I know what you mean, they go for like 60-80.
It is quicker if models are the same as it has dual channel then, but the difference between two same models and two different ones is so minimal you will never notice it. Usually more RAM outweighs dual channel or faster RAM a lot.
Your MB will support 6GB. 1x4GB and 1x2GB.