I have a T400 with very similar specs to what you are looking at (differences are 4g ram, 320gb hardrive (brand new, yay!) and I have used XP pro (32-bit), Vista Ultimate (32-bit), and now Windows 7 Ultimate (64 bit) on it. I run the same types of programs you do as well (office, adobe cs2, dreamweaver, as well as some gaming). I have also owned a few other widescreen thinkpads (to comment on the screen) so I hope my experience can be of some use to you. My comments are below, organized by topic.
1)
Operating System:
Windows XP Professional (32 bit): xp ran just fine, as is to be expected on a machine with these specs, although the 32 bit OS limited performance by not using all the ram. Overall it was a stable, no frills, good basic operating system. With XP pro on a T400 you get what you expect, but it is an 8 year old system that is frankly rather uninspired and boring.
Windows Vista Ultimate (32bit): simply put, it ran like Vista.

It was graphically quite pretty (aero is pleasant to look at), but fairly slow, and always gave me weird issues regarding power states, wireless, and graphics (lots of graphic card crashes, even with switchable disabled, running only on the ATI). I had only 1 BSOD in my 9 months of use - so the stability issues that other people complain about were never a problem on the T400. My lasting impression though (and why I had switched back to XP until this weekend) was that vista always felt "bogged down" despite the high spec of the machine.
Windows 7 Ultimate (64-Bit): I did a clean install of Windows 7 Ultimate (64 bit) this weekend, and I finally feel like I have unlocked the potential of this machine. It is incredibly fast (53 seconds from pushing the power button to open browser window), graphically stunning, and so far perfectly stable. Actions like opening documents/folders/programs are almost instantaneous. Web pages open faster. In my gaming experiences I have gained 20+ FPS accross the board. The windows aero interface is beautiful and seamless (no hiccups or delays as with vista) and resource allocation is much more economical. The install took almost no effort as virtually all of the drivers were included in the Win 7 build, and system update (the only thinkvantage stuff I reinstalled) took care of the rest. Simply put, Win 7 is perfect on a T400, and really unlocks its true potential. I could not be happier with the performance right now.
2)
Screen Choice
WXGA LCD: I had the ultra bright standard WXGA screen on my Z60 and Z61, and it was a solid performer, although nothing spectacular. While it was noticeably brighter than screens on comparable dells and hps, it was just a basic 1280x800 laptop setup. Nothing bad to say about it, but nothing extraordinary either.
WXGA+ LED: This screen is one of the reasons I originally purhchaed a T400 because I wanted the greater real estate (1440x900), the lower power consumption, and the extra brightness to limit eye strain. It has been all I was looking for and more! This LED screen on a T400 is exceptionally bright, blowing away my desktop monitors and every other laptop screen I have seen. My mac loving friends (poor buggers!) mocked my purchase of a business machine until they saw the screen, because it makes their macbook pros look terrible in comparison.
Some people have complained about the color range and brightness but this utterly baffles me. Blacks are true black, colors are vibrant (and again true) and as commented before the brightness is exceptional. There is also tremendous adjustability in the brightness level, from almost completely off (only readable in the dark) to bright enough to light a room (never have a problem in the sun or with reflection). It is the best laptop screen I have ever used (and I have played around with just about everything) and is one of the elements that, in my opinion, sets the T400 apart from the field.
The lower power consumption is also a nice feature, as with a medium setting I can get almost 3 hours out of the 4 cell battery using a good balanced performance setup with discreet ATI graphics. I could probably push 4 going to max battery state and using the switchable, but I hate gimping performance.
3)
Configuration:
Regarding your configuration, there are a couple changes I would make.
RAM: Get 4gigs of ram and a 64 bit operating system, these are keys to top performance. Crucial has 4gb kits for almost nothing right now, so you could order your machine with the bare minimum and just install it yourself (easy peazy).
Hard Drive: The 160gm hard drive actually only gives you around 120gb usable after the recovery partition and other lenovo install files are taken into account. I would opt for a 250 or 320 to ensure you have plenty of storage in the future, especially considering how much the prices have come down. Stick with 7200 rpm as you planned, it just makes everything faster.
Wireless: Good choice on the 5300 wireless card - it get great reception and holds it.
Graphics: The ATI discrete graphics card is also a must, and if I were you I would just disable the switchable graphics entirely and run exclusively on the ATI. The power consumption only changes by about 15% so you can still get acceptable battery life while enjoying all the bells and whistles of Windows 7 in all their glory.
Battery: Regarding the battery, the 9 cell will stick out of the back a fair bit. It is the one design element I think lenovo did poorly, as only the 4 cell battery actually looks like it is integrated into the machine - the 6 and 9 both jut out the back in an awkward manner. If you can afford it, I would get two batteries (one 9 cell and one 4 cell). Use the 4 cell for general lugging around where you know you will not need more than around 2-3 hours of battery time or will have easy outlet access. It is lighter and smaller, and it makes the computer fit better in bags. Throw the 9 cell in when you need 5 hours+ battery runtime, as I said it sticks quite far out of the back of the machine in an awkward manner, and makes it impossible to fit into some laptop backpacks.
Turbo Memory: I do not see a need for turbo memory on a machine like this, simply because in a 64 bit operating system you can utilize 4gigs of ram (or more) to its fullest. Turbo memory is an innovation that essentially addressed the limitations of 32 bit systems by trying to squeeze extra performance when the OS was maxed out in terms of the resources it could utilize. Now that 64 bit systems are mainstream (they were very limited when turbo memory was introduced) the OS is no longer limited and your 4 gigs of high speed ram will do more for performance than the turbo memory could dream of. I say skip it.
I hope this post is useful to you - please let me know if I can provide anything further.