I edited my first response to mention that we use a 2Wire card that my DSL provider gave us, and a ten dollar Trend Micro PCMCIA card I got at Frys both work fine.
I actually write wifi software for a living, and I have another T22 that I am touching at this moment as I type this. I've found pretty much any PCMCIA wifi card that has a driver for Windows 98 (which is most of them) will work fine.
I have my work T22 setup with ghosted images of Win98SE (you need SE, but you probably have it now), Win2K, and WinXP. The T22 works OK with XP when you have 512M, but I wouldn't recommend it with 256M.
From what you wanting to use this laptop for I just wouldn't spend the money on more RAM an an OS upgrade. It'll work fine as is for watching DVDs, web surfing, email, word processing, etc.
It wouldn't be the best choice to edit the next Pixar cartoon feature, but it doesn't sound like you're into a lot of audio/visual work.