A few things may happen with the Ram. BIOS may simply ignore the extra ram, and only give you access to the 4GB. BIOS may get confused and will not POST. Bios may get confused, but try and move on and the computer may just run slow. In any case, it would not hurt anything to try it and see, but most likely you would be best off just installing 4GB.
Check the manufacturer's website, there may be a BIOS update that expands the amount of Ram supported... unlikely... but possible.
I believe the fastest stock C2D was at 3.2GHz, but you can OC those puppies pretty good, so the 3.8 is probably the max the multiplier can handel.
That CPU "should" work, but there is a potential issue: Your mobo only supports an FSB of 1066, while the CPU is 1333, so it may be that it will not support this newer processor. There is also a chance that it will work just fine, but at a slower bus speed. I personally think it would work, but it is up to you to decide if it is worth spending money on something that may not work out.
Either way, I would highly suggest moving up to a Core2Quad at minimum, and getting a mobo that can support a quad core with your 8GB of ram. The more modern mobo will have faster buss speeds, the extra ram will prevent virtural memory use, and the C2Q should have enough horsepower to keep going for day to day tasks for a few more years yet (especially if paired with an SSD).
Another question: What are you upgrading from?
Check the stats and comparisons between your old CPU and the one you are looking at to make sure that it is worth the upgrade in the first place. Compare your current CPU, vs the one you are considering, vs a modern entry level offering. You could get a nice 20% gain in performance, but if a more modern entry level system (read Pentium D or i3) is 2-3x faster, then it means that it would still probably be worth saving your money and doing a core update with the CPU, mobo, and Ram.
Last note: it would seem the CPU you are looking at does not have a heatsink, it is just the CPU. Be sure that you have a heat sink which fits your system, and is big enough to support this CPU (C2Duo line was not hot like the old P4 line... but at 3GHz they did get a quite warm).
Thanks for the advice - the only reason im looking to upgrade the basic bits due to costings just looked at a few motherboards a bit pricey for me at the moment - just want a bit more power - to play COD4/ DFBHD lol.
I do have a Core2Duo in there at the moment @ 1,8ghz would that heat sink be good enough or would i need a replacement?
However, double of something older may still be too slow for newer programs, and will definitely be too slow for games being released down the line, so I would be hesitant to throw money at something which is a very temporary fix.