sanjeevkr, welcome to the forum!
My former Dell Latitude D610 has similar specs (the Mobile Intel(R) 915/910) and had 2 slots for RAM, with a 2GB limit, running XP Pro. It came to me with the full 2GB RAM in one slot, the one underneath the keyboard was empty.
So I had an extra 1GB stick of compatible DDR2 RAM, I added it, but it didn't show up. The slot was OK, because I removed the 2GB stick, then rebooted, it showed up as 1GB RAM installed.
Adding more than your max capacity of RAM won't work, even if you have a empty slot available to you.
I did consider upgrading the CPU myself, but in the end decided it was not worth the expense & trouble, taking into consideration the other problems with the notebook (which were numerous).
Another thing, the graphics for the computer (the Intel(M) 915/910), is not the best, by far, for a Windows 7 install. The Aero graphics will not display on it. Win 7 Home Basic (doesn't have Aero) will work OK, but the only way in the US to obtain that particular OS is to be a TechNet member, which will cost $199 per year for the Desktop subscription (the lowest cost membership available).
But even then, that's not meant to be a permanent install, the software is for evaluation purposes only. And still, you'll be faced with the need to obtain Win 7 drivers (or Vista ones, they usually work). They're getting harder to find by the day. Even Windows Update doesn't release updates for this hardware any longer.
If your notebook is otherwise running fine, you can sell it on eBay (many XP based notebooks still brings in around $250 to $300). Then turn around & visit Newegg, and find another at a great price, and in most areas of the US, no taxes.
That way, you'll be spared a lot of time & money, for what will probably amount to be less than your desired results.
Best of Luck,
Cat