Without specifically going through your questions item by item, there are two main messages I would like to convey:
1. Computers no longer should be expected to last 4 to 5 years. As evidence, consider this article that lists what computers can run Mountain Lion, and bear in mind Mountain Lion was released in July, 2012:
2. A corollary to (1) above is "newer is better". I strongly suggest getting a new computer now. The MacBook Air 2013 is powerful.
Also, consider selling your older machine. It is not worthless. There are online sites, as well as Apple's recycling program: http://www.apple.com/recycling/