Hi
Did you defragment using a proper tool or the built in one? The built in one doesn't really achieve much.
I'm not convinced adding more disk space will make your system run any quicker whereas a badly fragmented paging file will impact upon performance.
Ram is very cheap these days as well - it wouldn't hurt to stick some more in.
If you do get another hard disk, I'd put that in as a second drive rather than replacing your main drive. You can then have two paging files - one on each disk - which will help with performance.
Steve