I wouldn't worry too much about the internal HDD; you can always building an external one or get something like this
lacie. I've even seen a few that have usb and firewire expansion ports which would also be nice.
Speaking from experience with the burner on my iBook; it works just fine. The extra ram is a nice plus. Warcraft III should work just fine (esp. w/the extra ram). I run Warcraft III on my iBook (same graphics card) w/768mb of ram and it runs smooth. The video card/memory is not upgradeable.
The wireless cannot be upgraded. Well not very easily; there are a few sites that sell the internal airport/BT kit but from what I've read it can be tricky installing. I've also read lots of mixed reviews about using a usb wireless connection. So if wireless is a major factor for you this may be a downfall.
$350 is still a steal though.
Can't comment on syncing up a Dell Axim.