I attached my activity monitor. It seems that I have a lot of Page Ins and Outs and swaps. Is that good or bad? And do I need more memory? IStat tells me I have 16 MB of memory free.
No, you're doing pretty good. 1.30 GB Page In vs 0.09 GB page out, comfortably below a 10% ratio.
Your numbers are big because you haven't rebooted for some time.
If you start getting more than 10% Page Out ratio, then you could consider getting more RAM, or if you start using Photoshop, digital Audio or digital Video production software, which can benefit from more than 2 GB.
Don't worry about the Free and Inactive numbers, let OSX manage the memory.
At the moment, the Apple developer notes state unambiguously that the largest module that can be recognized is a 2 GB module (maximum 16 devices, maximum 1024 MB density per device). So unless those docs are wrong, the MacBook Pro limit is 4 GB.