From what I can find it looks like it can handle a max of 256MB in two slots, 2 x 128MB.
The difference is the motherboard and chipset. There's nothing you can do about that, unfortunately.
For roughly $200 (including shipping) you can upgrade your case, PSU, motherboard, CPU, and RAM. You can reuse your optical and hard drive. Using SYSPREP you can even move your Windows installation (Google it for a step by step). Here's the parts:
Newegg.com - Rosewill Ebony RA-HG-M-01 Black Steel Ultra High Gloss Finished MicroATX Computer Case with 400W(Model:LC-8400BTX) Power Supply
$40 + shipping
GIGABYTE GA-M68M-S2P AM3/AM2+/AM2 NVIDIA GeForce 7025/nForce 630a chipset Micro ATX AMD Motherboard
+
AMD Athlon II X2 240 Regor 2.8GHz Socket AM3 65W Dual-Core Processor Model ADX240OCGQBOX
$91 + shipping
Newegg.com - WINTEC AMPX 2GB (2 x 1GB) 240-Pin DDR2 SDRAM DDR2 800 (PC2 6400) Dual Channel Kit Desktop Memory Model 3AXT6400C5-2048K
$45 + shipping
The difference is the motherboard and chipset. There's nothing you can do about that, unfortunately.
For roughly $200 (including shipping) you can upgrade your case, PSU, motherboard, CPU, and RAM. You can reuse your optical and hard drive. Using SYSPREP you can even move your Windows installation (Google it for a step by step). Here's the parts:
Newegg.com - Rosewill Ebony RA-HG-M-01 Black Steel Ultra High Gloss Finished MicroATX Computer Case with 400W(Model:LC-8400BTX) Power Supply
$40 + shipping
GIGABYTE GA-M68M-S2P AM3/AM2+/AM2 NVIDIA GeForce 7025/nForce 630a chipset Micro ATX AMD Motherboard
+
AMD Athlon II X2 240 Regor 2.8GHz Socket AM3 65W Dual-Core Processor Model ADX240OCGQBOX
$91 + shipping
Newegg.com - WINTEC AMPX 2GB (2 x 1GB) 240-Pin DDR2 SDRAM DDR2 800 (PC2 6400) Dual Channel Kit Desktop Memory Model 3AXT6400C5-2048K
$45 + shipping