I believe in having a lot of memory on a web server, I almost always get a mem upgrade when I get a dedicated box. Make sure that the ISP isn't charging a monthly cost for memory upgrades- it should be a one-time fee. If it costs more than the physical cost of the memory- don't worry about it, they need to account for labor, and replacements, etc., to me that's justified. And some profit!!
If an ISP charges $40/mo for 512 of extra memory, then after two years you will have paid $960 for that extra 512.
isn't it usually cheaper to just rent a newer server than to upgrade?
Usually a 512MB upgrade takes about 200-300 dollar. That's about 20 bucks a month, for 20 bucks more you usually can get a better server.
Unless you want to stay at your current server for more than a couple of years.
The first server I used for hosting had a pretty heavy load on it but was fine with only 256MB of ram. It was a P3 600MHZ machine. This was a few years ago, but if it worked then with a few hundred domains, and mysql, 512 should work now.