USB flash drives are much better than cdr burns. Try both and you will agree.
Provided the machine is USB 2.0, other wise it will be SLOW.
Anyway, alligatorman, if you do add a second hard drive in, it might be worth moving your page file, and items that are accessed less often to it.
If it were me, the first upgrade I would do is put more RAM in it, as Patio recommended. Crucial have an awesome tool on thier site that will tell you what kind you need. A quick google search following that should result in some cheaper sticks.
That said, I wouldn't spend too much upgrading the machine as it's fairly cheap to build a new machine (£200-£300), and you could "recycle" some parts, like the cd/dvd drive, case and possibly the PSU.