What should I do: Buy a new mac, or try upgrading my 3 year old Mac

Hello, I have a question that I would be grateful for some feedback on.
Background:
I bought the original 2006 white MacBook Core Due (NOT core 2 duo) 2.0 GHz with a 60 GB hard drive and 1 GB of ram. I am still using it. I am running snow leopard.
Symptoms:
My hard drive is almost full, I can barely run 2 apps (eg Mail and Firefox) at the same time without a serious slowdown. I am a budding photographer and my entire iPhoto library is on an external drive as well as my iTunes library. My computer cannot handle RAW photo editing, so I am forced to shoot in JPEG. I am a student at the University of Toronto for Computer Engineering, so I will need some power, but, being a student, I am not rich.
Question:
Do you think that if I upgrade my ram to the max of 2GB (for my model) it will make a large difference? Also, I could upgrade my hard drive to a 500 GB 7200 RPM drive. All this could be done for under $200.
My question is do you think that my resulting system after the above upgrades will be powerful enough? Or will I be forced to buy a new computer. If so I think I would go with the iMac and keep my Macbook for note taking in class.
If anyone out there has done the upgrades I have mentioned, I would be grateful to hear from you about your experiences.
Thanks in advance for your support,
AlwaysApple

if you can, wait until the next update to the macbook pro line. i have a late 07 macbook and was close to buying a new 13" mbp with the free ipod, but i would rather wait for the new intel chips that are more powerful and use less power.

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