In brief:
Froyo has flash support
which is one of the major
changes .
By having flash you would
be able to play online
games and many more .
Second is wifi hotspot so
you can connect other
devices with your phone .
Moreover it will give you
more speed abd less
crashes. Moreover it will
give you more speed and
less crashes.
I forgot to tell you about apps2sd so if you have limited phone memory (which you have) you would be able ti move your apps to your sd card.
I recpmmed you an official update if it's available.