The OP did state that he has 3GB of RAM in his current system so he should be ok. I'm assuming he mentioned the flash memory stick as an option for ReadyBoost technology however this shouldn't really be considered 'an option.' I'd strongly recommend trying to keep a very lightweight system if you do jump to Windows 7 though. Best of luck!
I've had nothing but problems running W7 on my Toshiba Satellite with Celeron 900 @ 2.2Ghz 2Gb. It works alright for a while but then I start getting BSOD during streaming video and it just gets worse from there. The shitty thing is is that Vista (basic is what I'm running. YUK.) isn't much better. Should have plopped down more money on a laptop and I would have been much happier.
I have an eMachines with that processor and 3GB of RAM, and have never had a problem with BSOD. My son constantly uses it for streaming Youtube videos, too. It won't be the fastest computer around, but it definitely will work.