More RAM never hurts, it's a matter of how much money you want to spend/waste. After a certain point, you're just not going to be able to utilize all the RAM on your system unless you're doing something berserk that sucks up resources (or using a Windows program that leaks memory, or using a Windows kernel that leaks memory for that matter...). I have 512 MB of RAM, and in Linux I touch my swap partition about once a week, if that, which means that I'm never using all my RAM. When your RAM fills up, you start using "virtual memory", which means you start swapping data between the harddrive and RAM so that the CPU thinks you have much more RAM than you do (the alternative being your computer freezing or refusing to do anything until RAM is freed i.e. until you kill some programs; that wouldn't be good). Swapping to the HD is extremely, extremely slow (orders of magnitude slow) compared to using memory already in RAM, and more RAM will save you from swapping; that's about it.

I'm pretty sure DDR RAM is made to work with 2 chips of equal capacity and performance though. One 1 gig chip is worse than 2 512 MB chips, so far as DDR RAM goes. Keep that in mind. If you buy 2 512 MB chips, and someday you want to upgrade, you'll have to trash them both. Might be good to spring for 2 1 gig chips if you think you ever want to upgrade in the future. But honestly, what the heck do you need 2 gigs of RAM for? Unless you're running a server or something.

2.8 GHz is ridiculously more than you'll likely need in the next couple years. What do you need that much CPU power for? Playing Solitaire? Booting Windows in 25 seconds instead of 35? A 550 was almost good enough for me. I don't plan to upgrade from this 2.6 GHz for a long long time. It's just not worth the money. My computer far exceeds the requirements for everything I'm likely to do in the foreseeable future.