I don't know if I'd describe the $130 ($80 if you're a student) of upgrading the OS in such negatively graphic terms, but hey, whatever.
Right now I would have to agree that the iBook is just an amazing value when compared to a PB. True you can't max out the RAM as highly, and there are some other differences in the cache and whatnot, but I couldn't justify the price difference. I love my iBook, and until a G5 PB comes out I see precious little reason to buy one.
If I needed a new laptop for school I'd get an iBook now, and if a G5 PB does indeed come out soon you'd be in pretty good shape for selling your iBook since it's not in the same category as the PB and isn't therefore instantly obsolete. I got nearly $500 for my Pismo PB on eBay, which is about 1/3 of what I paid for it what, 5, 6 years ago? As far as computers go that's pretty darn good.
-Rob