Upgrading Mac Mini in order to use iTunes

Okay, here is my issue.....
Bought the wife an iPhone 4, tried to sync with an old iTunes version on her Mac Mini running OS 10.4.11.
iTunes said we needed to download the latest version (v. 10.7) in order to work with the iPhone. Tried to download the latest version but could not because our OS was outdated.
Researched online and discovered I had to purchase a current OS disc (retail version) as a OS system disc from any of my other 3 Apple computers would not work. Apparently the discs only work with the model they came with.
Went to Apple Store to inquire what to do. Told I did indeed need to buy a retail disc but they do not sell them. Have to order from Apple Care. Also informed that my Mac Mini Intel Solo Core, 512 MB RAM didn't have enough memory for the OS 10.6.3 Snow Leopard disc. That I needed at least 1GB of RAM. Apple does not install memory in that computer anymore and referred to 3rd party vendor.
Went to 3rd party Apple vendor and had them max out the Mac Mini with 2GB of RAM.
OS disc arrived today. Tried to install but says not enough space. Read the specs on the side of the box and it does indeed say the installation needs 1GB of RAM but also states it needs another 5GB of RAM...I don't know what for?.....would have been nice of the Apple Genius to tell me that before I went to the trouble and expense of upgrading the old Mac Mini.
In any case, here is my new question....if I get an external HD in order to have the space to install the OS 10.6.3, so I can download iTunes v. 10, in order to be able to sync my wife's new iPhone 4, so she can actually enjoy all the phone can do....will this all work or do I need to trash the computer and just get a new one for her? Does running the OS off an external HD slow down the running of basic computer functions?
boy, it would be nice if all of this was backward compatible and the iPhone would have worked with the older version of iTunes...maybe it wouldn't have all of the latest and greatest but we didn't need that...but we do need it to at least work as intended.
I'm getting a headache from all of this but I thank you all for your expertise and your time.

Hello,
In any case, here is my new question....if I get an external HD in order to have the space to install the OS 10.6.3, so I can download iTunes v. 10, in order to be able to sync my wife's new iPhone 4, so she can actually enjoy all the phone can do....will this all work or do I need to trash the computer and just get a new one for her? Does running the OS off an external HD slow down the running of basic computer functions?
Yes, I think youre confusing RAM Memory with Free Disk Space, (virtual Memory & storage).
Snow Leopard/10.6.x Requirements...
General requirements
   * Mac computer with an Intel processor
    * 1GB of memory (I say 4GB at least, more if you can afford it)
    * 5GB of available disk space (I say 30GB at least)
    * DVD drive for installation
    * Some features require a compatible Internet service provider; fees may apply.
    * Some features require Apple’s MobileMe service; fees and terms apply.
Which apps work with Mac OS X 10.6?...
http://snowleopard.wikidot.com/
It's been pulled from the online store & Apple Stores, so you have to call Apple to buy it, last I heard.
Call Apple Sales...in the US: 1-800-MY-APPLE. Or Support... 1-800-275-2273
Other countries...
http://support.apple.com/kb/HE57
Honestly, I hate this obslescence deal, but to be truthful, Core Solo AND 2 GB of RAM isn't going to be anything but disappointing in use.
And I'd avoid thenew Minis  & iMacs like the plague, I'd look for a used older model than 2012s, mybe even a 2009 model.

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