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Find out which motherboard your friend has, search its page on the manufacturer's web and see which are your options regarding CPUs and RAM.

If it has an LGA 775 CPU socket it's very likely that it can be upgraded to a Core Duo/Quad or Pentium Dual Core (be careful with the FSB and TDP).

If it accepted 1.5GBs of RAM and it seems to have multiple slots, I guess it can accept 2GB or even more? All the memory sticks in use have the same specs (all are DDR 2/3/whatever and have the same speed)?

EDIT - Disable Aero in Windows 7, it eats plenty of resources.