Mountain Biking - Upgrading a Haro V-3

First off let me say i'm new to the sport. I've read through the FAQ.

I have many hobbies. I have many toys. I am one to always do my hobbies right. I like aftermarket parts, upgrades and having high quality equipment to do my deed.

I have a new Haro V-3 that I purchased 2 years ago. It has sat in the basement for the past two years with minimal use. I'm finally starting to ride it on a daily basis and really enjoying it. I've been doing some reading and I want to start transforming the bike into a bit of a higher quality machine.

The bike sold for $400 new. Here are the specs:

Bicycle Type Mountain bike, front suspension
Sugg Retail $435.00
Weight Unspecified
Sizes 14", 16", 18", 20", 22"
Colors Rubyism/Silver, Midnight Blue

Frame & Fork
Frame Construction TIG-welded
Frame Tubing Material 6061 T6 Oversize Aluminum
Fork Brand & Model SR Suntour XCM-MLO, 100mm
Fork Material Aluminum/magnesium
Rear Shock Not applicable

Components
Component Group Mountain Mix
Brakeset Tektro IO Mechanical Disc w/6” Rotor brakes, Shimano levers
Shift Levers Shimano EF50
Front Derailleur Shimano C050
Rear Derailleur Shimano Alivio
Crankset SR Suntour CW-XCC, 22/32/42 teeth
Pedals ATB Caged
Bottom Bracket TH Sealed Cartridge
BB Shell Width Unspecified
Rear Cogs 8-speed, 11 - 32 teeth
Chain Shimano HG40
Seatpost Alloy Micro Adjust, 30.9mm diameter
Saddle Selle Sport
Handlebar Alloy Riser
Handlebar Extensions Not included
Handlebar Stem Alloy Clamp-On
Headset 1 1/8" threadless Aheadset OS

Wheels
Hubs Pivit Disc
Rims Weinmann ZAC 19, 32-hole
Tires 26 x 2.10" Kenda Klaw
Spoke Brand Stainless steel, 14ga. (2.0mm) Straight Gauge
Spoke Nipples Unspecified

I am a casual rider. I ride around the city and on paved trails. I want my bike to be as smooth and light as possible.

I'm here to ask you seasoned riders what I should look to replace on this bike to make it more of a mid-level bike.

I'm not sure if i'll hear that I shouldn't waste money on upgrading a low-level bike or if i'll hear don't worry about upgrading it if you just ride around the city. Like I said, when I do my hobbies, I like to have high quality tools to do the job.

Just looking for comments and advice. Thanks for your time.

I'd also like to mention that I want to use this bike as a trail bike/road bike. I purchased more of a road tire that I use mostly ... I put the trail tire on on specific occasions when I know i'll be riding trails.

Any advice on parts that I could use that would better suit for road vs. trail would be appreciated as well.

I think I'd be tempted to PM cyclops (http://www.bikeforums.net/member.php?u=30460). His username actually used to be harov3 until he moved on and changed it. He used to be a regular; haven't seen much of him lately.