A couple of questions: now much RAM is in the machine and how much free space in the hard drive?
You realistically would not want to go any farther than MacOS 10.4 Tiger, as 10.5 Leopard is beyond the reasonable capabilities of your machine and even with third-party "tweaks" that allow installation would still run more slowly than Tiger on your machine. Of course, 10.6 does not run on anything but the Intel processors, so that is out of the question.
You can speed things up a little bit by putting in a faster hard drive than the (probably 4500 RPM) drive that came with the iBook. I noticed a speed increase even going to 5400 RPM, and you can get even 7200 RPM drives for that computer. If you have less than about 10 or 15 Gbyte of free memory on your HD you probably would begin paying a performance penalty with Tiger. Reasonably, going to a larger 5400 RPM drive might make sense.
You can put up to 640 MByte of RAM in your machine. I see OWC with a 512 MByte stick for a reasonably small price, so there should be other suppliers out there with similar deals. Maximizing the RAM can be a big upper in machine speed, as the system is spending less time doing page swaps with virtual memory.
That being said, no matter what you do, this machine will likely still feel somewhat slow, even surfing "normal" websites without a lot of Flash content. My TiBook, with 1G memory and a 160 GByte 5400 RPM drive is definitely not swift these days. But then again, both your and my machines are nearly nine years old, which is several geological eras in computer time.