Should I upgrade an 8,1 iMac?

umm, I think it's time for a new computer? C2D is very old.

 

If you aren't using the computer for anything heavy, upgrading to an SSD and upping the RAM to 8GB or 16GB will definitely speed the machine up.

 

Then upgrade to a SSD and max out the RAM.

 

I have the 8,1 as you. I skipped Yosemite and did a clean install of El Capitan when the latest Mavericks update trashed all my user accounts (another story). It's not too bad actually, I didn't notice any real performance difference from Mavericks. If you could squeeze in an extra 2GB of RAM that would help but an SSD drive would make a huge difference. I was going to do the same myself but ended up going back to PC for my main computer instead as I was disappointed with the new 21" iMac.

 

Same mac here. Put a 4GB ram module that will bring you up to 6 (maximum), and put a SSD inside.
Make a fresh install of El Capitan and you'll happily squeeze a couple more years out of your iMac.

 

I think you should use that machine as is for as long as possible then upgrade. I wouldn't spend even $200 on on a 7 year old computer. Save the money, and use it on a replacement when the time comes.

 

I think an SSD upgrade would make a huge difference. I did this with our aging mid 2007 iMac a couple of years ago and it definitely extended its life - though it's finally being replaced. SSDs are pretty cheap these days and the installation on your iMac is not too difficult if you're up for doing it yourself.

 

You'll see improvements with El Capitan if you do a clean install (ie from scratch and then reinstall the programs). Start with doing this. Then add the 4GB RAM module if you can afford it, your system will require less (if any) access to the hard drive when missing RAM.
At this point your system should already feel a lot faster.
If that's not enough then you can consider the SSD. Pick a small 128GB and put your data on an external disk if they don't fit.
Trust me it's not a waste.