I wouldn't bother unless your computer can boot the 64-bit kernel, a requirement to install and run 10.8. See the following: OS X v10.6- Macs that use the 64-bit kernel - if your computer isn't on the list you can't install 10.8.
You can upgrade RAM to the maximum your computer model can accommodate. For the 2007 iMacs that may be 4 or 6 GBs. However, if you are expecting something special to happen, it won't. Neither Snow Leopard nor Lion will make your machine faster.