There's also a hack to put in a bigger hard drive, but I suspect it's easier to use compact flash drives externally.
512MB is actually not that small for a Linux install - Windows would indeed run like crap on that, but Linux runs beautifully on it, and you should be able to do a great deal at once. Video is what starts to tax Linux on machines with lower specs, so that may be true of video (especially if the CPU is slower), but it should do quite a lot of everything else. (It'll look like Firefox uses up a lot of that memory, if you're watching the system monitor, but it's not actually true. It just makes itself look big, rather like the Cat on Red Dwarf.)
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512MB is actually not that small for a Linux install - Windows would indeed run like crap on that, but Linux runs beautifully on it, and you should be able to do a great deal at once. Video is what starts to tax Linux on machines with lower specs, so that may be true of video (especially if the CPU is slower), but it should do quite a lot of everything else. (It'll look like Firefox uses up a lot of that memory, if you're watching the system monitor, but it's not actually true. It just makes itself look big, rather like the Cat on Red Dwarf.)