Hi Chris,
I went with the Handspring because of the expansion slot and their color monitor is 64K colors. As you probably already know, the expansion slot has ENDLESS possibilities (cell phone, GPS, MP3, digital cameras, bla, bla, bla, etc.).
I wish they would show all the modules on their website. I got a catalog with mine and the number of modules in there is amazing.
As for the color, it has 64K color and I think the Palm has 16K - don't quote me though, but I know it's lower.
As for updating the OS, to tell you the truth, I don't know. Try e-mailing Handspring, I'm sure they will get back to you with an answer right away. Let us know too!
I have a few ideas about apps, but am still in the architecture/design stage - I'll let you know.
Talk to you soon,
Matt