How free does your MacBook have to be to not make the loud fan noise?

Sounds like your problem is too little RAM for all the applications you are running concurrently. How much RAM do you have installed? Which specific MB model do you have? Open System Profiler/Information and look for the Machine ID.

Upgrading to Lion won't fix the problem. You need at least 2 GBs of RAM for Lion. For all you want to do you would need more RAM than that. Running Windows in Parallels will use nearly half the RAM you have installed up to nearly 2 GBs.

About OS X Memory Management and Usage

Reading system memory usage in Activity Monitor

Memory Management in Mac OS X

Performance Guidelines- Memory Management in Mac OS X

A detailed look at memory usage in OS X

Understanding top output in the Terminal

The amount of available RAM for applications is the sum of Free RAM and Inactive RAM. This will change as applications are opened and closed or change from active to inactive status. The Swap figure represents an estimate of the total amount of swap space required for VM if used, but does not necessarily indicate the actual size of the existing swap file. If you are really in need of more RAM that would be indicated by how frequently the system uses VM. If you open the Terminal and run the top command at the prompt you will find information reported on Pageins () and Pageouts (). Pageouts () is the important figure. If the value in the parentheses is 0 (zero) then OS X is not making instantaneous use of VM which means you have adequate physical RAM for the system with the applications you have loaded. If the figure in parentheses is running positive and your hard drive is constantly being used (thrashing) then you need more physical RAM.

Adding RAM only makes it possible to run more programs concurrently. It doesn't speed up the computer nor make games run faster. What it can do is prevent the system from having to use disk-based VM when it runs out of RAM because you are trying to run too many applications concurrently or using applications that are extremely RAM dependent. It will improve the performance of applications that run mostly in RAM or when loading programs.

Yes, that is your RAM. System Profiler/Information is located in the /Applications/Utilities/ folder.

If you provide the Machine ID then I can look to see what the maximum RAM is that you can install in the model you have.

Only one thing truly speeds up the computer - a faster processor. The only way to get that is to buy a newer computer model.

Model Identifier: MacBook4,1 is the model.

The above indicates you could install up to 6 GBs of RAM. Given what you plan to use I would suggest installing the maximum allowable RAM.

Now, to the issue of fans. The fan runs continuously, but if the computer starts to get hot then the fan speed increases. This may be normal or abnormally caused by processes that have gone astray and are using too much CPU time. To determine if that's the case:

Open Activity Monitor in the Utilities folder. Select All Processes from the Processes dropdown menu. Click twice on the CPU% column header to display in descending order. If you find a process using a large amount of CPU time, then select the process and click on the Quit icon in the toolbar. Click on the Force Quit button to kill the process. See if that helps. Be sure to note the name of the runaway process so you can track down the cause of the problem.

If you have too many concurrent applications running then you run out of memory. When that happens the OS memory manager starts using free disk space to provide the "memory" that is needed. By using the disk instead of physical RAM, the drive is being over-used causing everything to slow down and even grind to a halt. To avoid that you have to have fewer applications running so you don't use up your available memory.