Since you're starting with a $199 bike, it seems kinda crazy to spend another $150 in parts right off to make it run smoother. I would "try" and be patient and wait till the parts wear out and then upgrade.

IMHO if you want your drivetrain to shift smoother and you brakes to respond well, invest in some good cables and housings. A full XTR groupo will work like SHE-AT if the cables are crudded up and rusty! A teflon coated cable or a lined cable housing makes a "HUGE" difference! If you don't want to do this, make sure your cables are kept clean and put some lube into the housings on a regular basis. I personally will drip some Tri-Flow into the housing ends at least once a month. You can do this without disconnecting them from your bike.

Let me try to explain. Shift your front derailleur (left shifter) into the big chainring and then w/o moving the cranks click the shifter or rotate the Gripshift into the small gear. This provides slack in the cable and will allow you to pull the housing away from the frame stops. Move the housing back and forth along the cable while dripping lube into one end. Put the housings back on and pedal the bike. Now do the same thing with the rear derailleur and the brakes!

Once the drivetrain wears out, I'd replace parts in this order:
1)chain-your chain will wear out first and is the cheapest to replace
2)cassette-your cassette usually wears out with your chain, but if you replace your chain regularly, you can usually get 2-3 chains per cassette
3)shifters-good shifters will "feel" crisper and make a more significant difference in shifting (IMO) if the derailleurs are adjusted properly. Front shifters are the most noticable between a low-end and a high-end shifter.
4)cranks & bottom bracket-Stiffer cranks will make a noticable difference and better cranks usually come with aluminum chainrings (lighter weight) and usually have "ramps and pins" that help shifting. Replace the bb at the same time for compatability reasons and stock bb's are usually VERY CHEAP and VERY HEAVY!
5)rear derailleur-You would have to change this sooner if you are upgrading from 7 to 8 or 9 speed! I would wait on the derailleur, only because they cost a lot and the differences aren't THAT significant!
6)front derailleur - same as rear!

I'll probably get a lot of dissagreement on this, but that's what I think! I've changed my LX shifters to XT shifters and it make a BIG difference. I've changed my alivio rear derailleur to an XT and it made a difference, but not so much. I did the same thing to my wife's bike b/c she had problems (not enough strength) shifting the front derailleur. After I swapped the shifters, she didn't have any problems.

This is just my opinion. I think too many people put too much emphasis on the derailleurs and not the shifters!