There are not that much OS upgrade options, unless you're willing to invest some serious money: Later OS revisions require more horsepower than you have available.
With your setup, I wouldn't recommend anything higher than OS 3.0 or 3.1 (there are only minor differences between the two, no need to upgrade from 3.0 to 3.1).
OS 3.5 and 3.9 require at least a 68030 CPU, AmigaOS 4 requires a PPC CPU (hard to get, very expensive).
However, you can have quite some fun customising and improving your OS with freeware hacks and add-ons from
Aminet:
BlazeWCP and FBlit improve the performance, NewIcons gives you access to much more beautiful icons, Toolmanager or similar programs enhance your Workbench with Mac-like "docks" or Windows-like "Task bars", there's a wide range of more powerful file managers available (DirectoryOpus 4, Dirmaster) etc.
