Yes, there is a reason people are choosing more memory over processor speed. When you start talking about processors in the Ghz range, most users will see very small, if any, difference in the performance of your computer. Especially if we are only talking about a few hundred Mhz difference. Memory, on the other hand, can make a big difference, especially now that multi-tasking is becoming increasingly popular.
What it really comes down to, though, is what you are going to use the computer for. 512 MB of memory is more than enough for most users. It will handle Windows XP, word processing, DVD's, and most games with no problems. If you do graphical design, video editing, or hardcore gaming, you may want to look at going for the 1024 MB.
However, if you want to avoid upgrading for as long as possible, I would suggest buying more memory. Applications are hogging more and more memory everyday. Chances are you would have to upgrade memory before your processor anyway.
Hope that helps!