First of all, keep in mind that the 9700 is old. The high end ATI Radeon Mobility GPU timeline looks something like this:
9600 -> 9700 -> 9800 -> X800
The current top-of-the-line portable gamer ATI GPU is the Radeon Mobility X800.
The current top-of-the-line portable gamer NVIDIA CPU is the GeForce 6800 Go.
The 6800-Go is significantly faster than the M-9700. In fact, it's real competitor is the M-X800.
For some games (Doom3) the 6800-Go is faster, for others, (HL2) the M-X800 is faster. In most cases,the 6800-Go and M-X800 are about the same in real-world performance.
As far as gfx ram, if you're using the latest games, the more the better. The higest quality settings in the latest games require 256+ MB. But also keep in mind that the mobile versions of these GPUs have fewer pipelines than their desktop cousins, so the amount of horsepower to make use of the gfx ram will be limited. So, basiclly, get as much as you can afford, but don't worry if you can only afford the 128 MB version.