If you're otherwise perfectly happy with the speed of your iBook, I'd simply forget about Second Life and save the 300$ towards your next Mac, iPod or iPhone. If your computer often bogs down, though, starts to write and read the harddrive frantically, it's a sure sign that memory constraints are active. With only 256 MB RAM and Tiger, this seems highly probable to happen all the time, or at least whenever you keep Mail.app, Safari and an iLife app open at the same time.
My question is WHY you are willing to spend $300 on a 1 GB stick of RAM
for an iBook - the RAM for an iBook should cost less than $100.
As an example: http://eshop.macsales.com/MyOWC/Upgrades.cfm?model=215&type=Memory&TI=3301&shoupgrds=Show+Upgrades