13 Year Old Gateway E-4000 questions

For an OS I'd be inclined to go with a Linux distro, pick the flavor you're most comfortable with (if you're not sure, most have live CD's to run from so you can try/test them).
There may be an advantage to additional ram, I'm not sure but there is always the possibility of the system becoming unstable if the ram doesn't want to play nice together. I'd say if the ram is cheap enough go for it (I just checked and @ $20 for a 1GB stick doesn't sound too bad)
 

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