The second part is trivial, install Lion or Mountain Lion and let it upgrade everything. That will create a recovery HD where you can then reboot and erase the main volume. If you save the installer after the first download, you can avoid the download the second time.
My experience is that the performance of older computers is as good as or better than the old OS - especially when you are erasing things and migrating files over later (or by hand) as much support for older systems was dropped making Mountain Lion fairly streamlined and responsive.
I think that computer could handle Mountain Lion. Lion felt like a regression as far as speed, but ML has some welcome improvements.
If you're trying to do this in a totally legitimate fashion, I would order a copy of Snow Leopard from Apple telesales (1-800-MY-APPLE). It should cost $20, although I have heard that you can get it for free if you explain that you are planning to upgrade to Mountain Lion.
It's not that old.
In my opinion it worth SSD in it. You may even put it in place of DVD drive with an adaptor (if you don't need it). And it will be really good oooomphh for the total snappiness of that computer.
I would recommend ML if you like to stay current or/and have iOS devices to have those iCloud features used.
Regarding the question how to get Ml installed I would recommend just buying it from other Mac with 10.6 or newer on it. Just login with you Apple ID into App Store and save installer .app created in Applications after download
BTW: max ram is 8GB for the model. DDR3-1066 is cheap