Upgrade to higher memory or faster processor on MacBook Air
With all that stuff you're running, you probably won't be happy with 4 GB of RAM. If it's truly an either/or decision, up the RAM unless you know that you won't be paging with only 4 GB. 

The processor goes from a 1.8 GHz Core i5 to a 2.0 GHz Core i7. I'm not sure that's all that much of a noticeable increase.

As for temperature, Apple will put in a sufficiency of cooling regardless of the processor you choose. I don't really get why people get freaky about laptop heat output: any heat problem I've ever heard of is due to environmental factors that the user (not the manufacturer) has control over.

All that said, I got a 2012 MacBook Air with 8 GB RAM and the 2.0 GHz Core i7, and I'm super happy with it. It's noticeably faster than my previous, a 2011 Air with 4 GB RAM and the 1.8 GHz Core i7, but I suspect that's mostly the RAM and the better graphics between the 2011 and 2012 models. 

tl;dr: probably the RAM, maybe the processor. It all depends on how you're going to use the machine.