Hehehe, yeah, OS 9 is like that :o
I love Pismos! They are a snap to upgrade too! If you want a modern operating system, your Pismo will support all the way up through OS 10.4. Upgrading to OS X would give you a much wider range of new applications to use, though it won't be as snappy as OS 9 on your older machine. If your hard drive is big enough you could keep OS 9 and switch between the two if you think you'd want to tinker around the two.
As I said, Pismos are a joy to upgrade. If you put a newer OS in you'll want more than 128 MB of ram, especially on a machine with a slower processor. You don't want to slow it down more by constantly using your page file.
The Ram modules live under the keyboard. Beyond that is more steps than I care to try and remember. This should have all the steps, including pictures. http://manuals.info.apple.com/en/PowerBookG3_FirewireSettingUp.PDF
The Pismo is very versatile. You can add an Airport Card for wifi, a larger hard drive, more ram, even upgrade the processor to a G4 500 MHz or a G3 900 MHz, last time I checked.