I'd get yourself another 512 MB RAM for a total of 640. (The 867 has two 128 MB sticks in it.) 512 MB RAM is about $100.
Actually, what I'd really recommend is getting the 1 GHz PowerBook 12". It's 15-20% faster, it has 256 MB built-in in 1 DIMM, a better video card, and it also supports DVI. All together, I think it is worth the extra $200. And you might be able to get away with 512 MB total, so you could save a bit on RAM. A stick of 256 MB is about $45. (I'd still recommend the 512 though, for a total of 768 MB.)