Software Update provides updates, not upgrades. Upgrades are major changes, updates are bug correction or tweaks. You have to pay (in just about all cases) for upgrades. Some required you purchase them on disc, but recently Apple has been doing it with downloads. For example, with your computer you could upgrade the system from 10.5.8 to 10.6 (by buying the disc) or to 10.7 (by first buying the 10.6 disc, then buying the 10.7 download). There are many more details.
No computer is endlessly upgradable. Eventually you will find that software upgrades no longer run on old hardware and you'll have to buy a new computer. You're not quite at that stage yet, though if you decide to go to Lion you may want more "memory" (RAM) on your computer.
You posted this in the forum for OSX 10.3 and earlier. The get the best response, please make sure you post in the correct forum. You also should not include private information such as hardware serial numbers in your post. I will request the hosts move the post and edit it.
Thank you Limnos for this clear and informative reply.
Can I buy this (CD upgrade to 10.6) locally in the UK at an Apple shop? I live quite rurally, so know not exactly where to go.
And would not a company of Apple's sophistication be able to send the necessary down the tube anyway, if I pay for it?
I apologise for my failure to post in the "correct" forum - I am in this regard a novice, so thank you for your forbeareance.