More ram is usually the cheapest upgrade, the biggest upgrade.

To get that extra ram to work, you'll need a 64-bit operating system.
Unless you're running a very low-end system with only 1-2gb of ram, I'd go with Win7.
Probably Home 64-bit, but Profession 64-bit if you also want the option of XP Mode (Home doesn't offer this).

Not sure your budget...

After Ram, processor and a cheap SSD are the biggest bang for your buck.