well first off ddr 200 is normally called pc1600, and ddr266 is called pc2100.
Yes you can mix, but it will only run as fast as the slowest chip.
Usually 200 is a little cheaper, but since so few people use it these days, it probably about the same.
Wether you need pc2100 or not depends on what speed your fsb runs at. Remeber ddr always runs at the same speeds as your fsb so if ran pc2100 at pc1600 speeds it would essentially be the same as plain old pc1600
You say you got a 1.2 athlon which means it could be either 200 or 266mhz fsb, that depends on your cpu is.
However most people will run there fsb higher and lower their multiplyer to get more memory bandwidth, so I would say go with pc2100 either way and overclock if your not already at 266.
And your last question, I would go for faster ram, since the only time you need over 512mb is in hardcore multimedia like 3d cad/animation, video editing and so on. Even then, I would still go for faster ram.
I went kind of fast, any other quetions?