512MB -> 1GB RAM will not really affect framerates in the majority of games, and neither will 4200rpm -> 7200rpm HD. However the benefits of the HD ouside of a gaming environment are much more readily noticed than the RAM upgrade.
The Hard drive that is the true bottleneck of computers at the moment because they are still mechanical whereas everything else is electrical, and this bottleneck will remain so until they come up with another method of large and reliable long term data storage.
Minimising the bottleneck with faster hard drives will always yield very positive results, in this case outweighing the 512->1024 RAM. If it was 256->512 RAM or something like that it would be another matter, but currently 512MB is enough for the majority of users and the greater benefit lies with the 7200rpm HD.
You are making the right choice with the Hard drive, and it is worth the $200 I assure you

stu