You can put two 2gb RAM sticks in your model 2,1 but it can only use 3,3gb. This is a hardware limitation and cannot be changed.
http://en.wikipedia.org/wiki/3_GB_barrier
http://www.everymac.com/systems/apple/macbook_pro/faq/macbook-pro-core-2-duo-3-g b-memory-limitation-details.html
OWC tests have found that there is a slight speed increase with having two 2gb sticks in rather than one 1gb and one 2gb. Your model is in the gray lines at the bottom of the graph. http://eshop.macsales.com/shop/Memory_Benchmark/Apple_MacBook/
You can upgrade from 10.4 to 10.6 with no problems. Any program that runs under 10.4 should run under10.6. See this list for compatibility with 10.6: http://snowleopard.wikidot.com/ You might have to upgrade some drivers for printers, etc.... And you will have to install Rosetta if you have any Power PC applications http://www.macobserver.com/tmo/article/snow_leopard_installing_rosetta/ I recently upgraded an older MacBook (model 1,1) straight from 10.4 to 10.6.
To upgrade your iLife and iWork. If you only want iPhoto or other single apps from iLife '11 you can get them from the App Store after you've upgraded to 10.6.6. iPhoto, iMovie or Garage Band for $15 each and Pages, Keynote or Numbers from iWork '09 for $20 each.
You can order a Snow Leopard 10.6 install disk for $29 as long as you have at least 1gb of RAM and 5gb of free space on your hard drive. http://store.apple.com/us/product/MC573Z/A?mco=MTY3ODQ5OTY
A 10.5 Leopard disk will run you around $200
Once you are at 10.6.8 you can buy Lion for $29 from the App Store if you have at least a model 2,1 MacBook. Lion will require at least 2gb of RAM but really needs 4gb to run smoothly. As for programs see this list for compatibility with 10.7 http://roaringapps.com/apps:table Also Lion doesn't run any Power PC programs. To see if you have any Power PC programs go to the Apple in the upper left corner and select About This Mac, then click on More Info. When System Profiler comes up select Applications under Software. Then look under Kind to see if any of your applications are listed as Power PC. Universal and Intel will run under Lion.
Before Mac switched to Intel processors they used Power PC processors from 1994 to 2005. Power PC 601 through 604, G3, G4 and G5. Applications written for the Power PC processors need the application called Rosetta to run on Intel processors. This was part of the Operating System in 10.4 and 10.5 but was an optional install in 10.6. With 10.7 Lion Apple dropped all support for Power PC applications.