1. Each "tenth" is treated by Apple as a new release, so you must buy
a full installer. I recommend 10.3 as a much more mature/stable OS.
2. Depending on which iBook you have, I suspect your only issue with
10.x (x > 1) would be RAM and HD space. Those puppies came with
durn little memory, and -- with any X -- you need at least 512mb, the
more the merrier.
You also need a bunch of HD space. An X upgrade will replace the 10.1
you have, but first you'll need 8-10 gb for the upgrade to use before
you wipe the original 10.1.