I have routinely installed more memory in every Mac I've owned - that is because they sell it to you with a minimum installed. As I said, it'll run with it - just not very speedy or well. Memory is cheap right now, so it wouldn't hurt to do it. Also, you will need to buy Lion (29.95 I think at the Mac App Store).
On the other hand, how old is your Mac? And do you have any other iDevices to use iCloud with (iPhone, iPad, other Macs, eetc)? If not, iCloud will not be of much use to you - it'll only be helpful if you buy lots of music for instance (or movies, etc) and then you can listen to/watch them on all your devices. I'd suggest reading up on iCloud as well before making a decision:
http://www.apple.com/icloud/what-is.html