RAM upgrade is one of the most cost-effective ways of increasing the performance of a computer (within certain limits). As Jonmor says, Vista needs at least 1 GB - preferably 2. You probably notice a lot of hard drive activity currently due to swap file usage which slows things down dramatically.
As long as you have more than 20% free disk space don't worry about that. Microsoft always used to say - and I presume they still do - that performance of an NTFS partition will not suffer until there is less than 15% free space. Defragging the drive is worth doing if you haven't done so recently.