You mentioned internal C: and D: drives in your notebook... is it 2 separate drives, or one drive with 2 partitions? If it's partitioned, that could be the cause of some of your performance issues.
If you do decide to upgrade to a bigger internal drive, the cost of a new 320GB 7200RPM notebook drive is about $89 these days, and Seagate just released a 500GB 7200RPM internal notebook drive for $139.