Milo,
the Dell manuals say the max RAM for that machine is only 1GB
No, the maximum supported module size is 1GB - 4 slots means that 4GB is the maximum installable RAM.
I agree that the system is a bit long in the tooth now, and even the fastest Intel Core 2 Duo that it supports is a bit short of grunt - assuming that the OP has one of the better CPUs - to get the best out of Win7 or 8. If it's a single-core P4...
And I'm sure you are right about driver difficulties - it doesn't help that the Dell support site is a bit of a dog's breakfast.
SD