SSD vs New Hard Drive?

How about both!

Get a SSHD which is a hybrid drive. It has a standard spinning HD then a SSD is added as a deep cache. Seagate offers a nice one which we use on these older systems.

One of the issues you will face is the systems SATA port limit and how a given drive (HD or SSD) will work with it. Your system has a SATA I (1.5 Gb/s) port so trying to install one of the newer SATA III (6.0 Gb/s) drives could be an issue if it can't auto sense the slower speed or have the ability to be jumpered to the lower speed.

Here's the spec sheet on the Seagate SSHD drive Laptop SSHD Note it can work with SATA I, II & III. We use the 1TB drive.