Step 3: CPU (hardware)
This uses the Meron core, and supports a bus up to 800MHz. That means for $250-ish, you can replace your T5250 with a T8300- that's 2.4GHz, a 3MB cache, and a decent FSB bump. They both run at 35W, so in theory your battery life and heat output won't suffer. The T8300 is also a 45 nm cpu, as opposed to the original 65 nm T5250. This specific upgrade has been reported to really beef things up- even Vista goes from 4.x to 5.x scores.
If that's a bit too pricey for you, save $40 and grab a T8100. That ones a 2.1GHz, also with a 3MB L2 Cache, also running at 35W. Between the smaller architecture, higher FSB, and 600Mhz speed increase, at just over $200 it could be worth the money to you.
I'm personally not in a hurry to upgrade, for various reasons. Using XP, the dual core 1.5GHz runs fine for me. I've also been watching the prices drop and speeds increase on Socket-P cpu's. I will eventually upgrade, but why rush? The longer I wait, the cheaper (and faster) a cpu I can get for my money.
The cpu can be swapped out through the bottom 'hatch' without a ton of difficulty. I can't give step-by-step instructions as I haven't done this, but I don't see any huge hurdles to overcome. I would just make sure you have a thin coating of Arctic Silver (or something equivelent) to replace any old thermal paste / pad residue. Enthusiasts sometimes actually redo this themselves simply to improve heat dissipation on their stock cpu's.