The netbook comes with Ubuntu 8.04.1 from the factory - and it comes with a special version, the LPIA version from Dell. LPIA is low-power intel architecture (like i386), which allows the laptop to boot slightly faster and, in theory although I've never seen benchmarks/performance tests, allows it to use less power and perform better with its Intel Atom CPU. I mention this because it provides possible reasons *not* to update to Intrepid...
A number of people have switched to "vanilla" Ubuntu installs with the Dell mini 12 and also upgraded to Intrepid, their are several threads in the forums. There are a few issues right now with Intrepid that take some working out (the chipset is so new that it requires a one or two line change to the xorg.conf file after install to get to work right, and somebody else mentioned fiddling with wireless to get it going, although others didn't have this problem and he had upgraded not done a fresh Intrepid install.
All-in-all, I'm sticking with Hardy and the LPIA install Dell customized. Everything works, standbye, wireless etc, so why mess with a good thing? Only thing that is a real bummer is .DEB files for i386 require hacking before they can be installed on the customized Dell-LPIA.
But again, I can't emphasize how great of a netbook this is. It is well worth the extra dollars compared to those with 10" or 9" screens, and it's still super tiny/light.
I am uncertain about upgrading the RAM, but am very happy with the 1GB setup we got (of course, this is never going to be a "performance" or gaming machine - the CPU is too slow, onboard graphics, etc, but it handles just fine for all the normal tasks).