Although W7x86 lists 1GB as the minimum, I've found 2GB to be the minimum sweet spot. More RAM is always a good investment, and even if you decide not to run W7 on this PC (hopefully your friend purchased the license outright to pass along to you), more RAM will be beneficial to XP, Ubuntu, or whatever OS you decide to run on it.  However, more RAM may not completely cure your sluggishness, as that could be a result (partially or fully) of malware infections, software problems, file system corruption, and/or a bad hard drive ... a reinstall to your specs may be in order. You may also try searching the forums (or Internet) to get a feel for real-world experiences.  I suspect there should be no issues ... I manage some D830's (similar systems - one step up, but same age/line) at work that installed and have run W7 flawlessly.
Does anyone know why Dell doesn't support Win7 on a Dell Latitude d630? This machine was built November 24, 2008 with Windows Vista 32-bit O/S. The original invoice date was May 22, 2009. Win7 wasn't released until October 2009. The guy I bought this from had installed Win7 and I didn't get any backup or recovery discs with it. It works okay except it doesn't have enough RAM, (which is no big deal). The problems occurred when I tried to update the drivers and discovered there are no drivers for this model with Win7. When I called Dell they said they don't support Win7 on this laptop. So I was just curious if anyone knew why? I'm not going to waste the money upgrading the RAM if Win7 is going to be a problem. 
Dell Latitude d630 and Windows 7