Yeah, sure, no problem. I can see how what I wrote was a little confusing. Let me try to clarify. And I'll invite people to chirp up with their own experiences, too.
Okay, so every modern OS has some form of intelligent memory management -- and each is intelligent (or not so intelligent) in its own way. OS X behaves very differently from Windows, and both of those behave differently from Linux. There are other OSes, but since those are the big 3, that's fine.
Okay, so when you load programs, the files are copied from your hard drive into your RAM chips. That's gross oversimplification, but in essence, that's what's happening. The programs also have supplementary "junk" that they run too (in other words, it's not a fair calculation to say that Word is X MB and Photoshop is Y MB and the OS is Z MB, so you need X + Y + Z MB of RAM). And then, they have page/swap files. In essence, in OS X, you will never get a message that you are "out of memory." Your hard disk is a physical extension of your RAM -- it's just a lot slower than your RAM.
Now, here's the sucky thing about OS X memory management. It is **NOT** the case that your computer starts to use the hard drive only when it has "filled up" all of your available RAM. Not by default, anyway. (There are some creative tricks that advanced users use to change their memory management settings, and some of those are worthwhile for certain people.) OS X will always use that page file.
There are two types of operations -- pageins and pageouts. You can see these in the Activity Monitor application (I think it's there -- someone correct me if I'm forgetting the name wrong) or by opening Terminal and typing "top" or "vm_stat". Pageins are normal, you'll have a lot of them, and they aren't a problem. Pageouts suck, however. They are what makes a machine really slow, and if you have lots of pageouts, it means you've exhausted your physical RAM. A common benchmark is the ratio of pageouts to pageins: if that ratio is high, you need more RAM.
You probably know a lot of this. The problem is that the system will pageout whenever it thinks it might be beneficial -- rightly or wrongly. So, take the case of an application you haven't used in a while, but that is open. It might page it out, and load some disk cache in there. And then when you go back to it...you wait.
More memory is universally better -- I won't deny that. What I am denying is that, if you use your computer like me -- lots of apps open at once -- you'll see a huge benefit from 1.5GB over 1GB. I am sure lots of people will disagree with me, but that's my personal experience.
On the 1GB at the start versus adding 1GB chip: I bet the Genius was, in a nice way, trying to tell you that you'll likely not care at all about the difference between 1.5GB and 2.0GB. Or maybe he was saying it's a better deal -- with the Apple deal, you pay $30 more for 512MB less total RAM than the scenario you're talking about. Anyway, on 1.5GB vs 2GB: the casual user will almost never notice that. I do database work for a living, so for me, I definitely notice those differences in a big way. (My big, nice machine with 16GB is having some issues, so I'm having to do all my work on my work on a machine with 12GB and one with only 8GB -- shudder.) But for the "traditional" user, the paging described above deals with the memory smartly.
Lastly, on .Mac: tough call. Depends on how, um, lazy you are, for lack of a better word. My personal advice would be to take that $70 and apply it toward buying an external hard drive, and backing your stuff up. If you shop sales and rebates, you can easily get yourself a nice 120GB external drive for $70. .Mac has lots of perks, and of course it can make your life easier, so it's a personal choice.
Final note: shop around. If you really want a 1GB stick, I think you can get it as cheap at $110. I found one today for under $100, and it's a name brand.
Edit: here's the link to that chip. Pretty sure this is the right item, although I'd double check before ordering:
http://www.zipzoomfly.com/jsp/ProductDetail.jsp?ProductCode=85016-72&affiliate=dealram
