Change in Memory

If I go from 768 (one 512 stick one 256 stick) to either 2*256 of pc3200 or higher, will I notice a performance difference?

Yes, you will notice a difference (depending on what kind your old ram was (I'm guessing SDRAM)

will it be a performance upgrade or downgrade, my old ram is pc2700

I would image it will all come out in the wash. You'll be losing 128MB of ram but be gaining the posibility of a higher overclock. You might see if you could borrow a pair of pc3200 sticks from a friend and find out if you get a better overclock. That way you wont be out any money if you can't push the cpu any further.

unfortuneatly of all my friends I am the only person who uses there computer other than a glorified typewriter. I want to upgrade to a xp3200, so it is worth it in the end.