I wouldn't bother with the storage upgrade. For the same money you can get a separate 500 Gig 7200rpm external hard drive. Since you'll be getting Leopard, an external drive would also be handy for Time Machine.
dabs.com - Seagate FreeAgent Desktop 500GB 7200RPM 8MB USB (ST305004FDC1E1-)
Apple upgrades are always notoriously expensive. They've improved their overall pricing in recent years, but once you start tweaking the specs, you can run up a big increase pretty quickly.