It will support it. You should consider adding more RAM, 2 Gigs is the minimum. Installing ML won't delete what you have on your hard drive.
HOWEVER, if you don't have a backup of your hard drive, you'll risk loosing everything if there is a hiccup during the upgrade procedure.
Buy, an external hard drive and backup your system.
Also realize that you will not be able to run any software written for the PowerPC chip. 10.6.8 will run those now, in a sort of emulator, but Mountain Lion will not.
You can see the PowerPC apps you have by opening System Profiler and selecting Applications from the Software section. Sort the columns by Kind and scroll down to where it has the PowerPC applications.
See here for any other software: http://roaringapps.com/apps:table