I built my Cannondale two years ago with an Ultegra grouppo after having ridden steel bikes for awhile (both road and mountain). Depending on how much you weigh (I'm about 180), you'll notice the difference in the frame stiffness when sprinting or climbing out of the saddle - it is much more responsive. A drawback is that you'll feel ever bump in the road. WRT compononents don't settle for anything less than 105. Ultegra is great, but you don't need Dura-Ace unless you make your living riding your bike. Also, don't sacrifice frame and fork quality for the parts upgrade. Components are cheap and easier to replace down the road - especially with previous model years. That stuff is easy to find on the internet.
Consider building it from scratch. It could save you a few bucks and you'll never need to have someone else repair it - you'll pretty much know and learn everything to keep it on the road.