You are correct about the memory. If you do not intend overclocking the FSB above 166 then you may as well stick with PC2700. Running the memory asynch at 166/200 CPU/Mem is actually slower than running synch at 166/166.
The only plus side on 3200 Ram is that it will give you a bit of future proofing, allow you to overclock the FSB even if you do not OC the CPU (by dropping the Multi) plus may allow you to run at faster memory timings at 166 FSB.