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The extra memory would help you run dedicated Mongrel servers and DRb servers that can handle the file uploads.  This is certainly a must for these kinds of applications.  So, I suppose you should buy as much as you can....start with 100MB (1 Mongrel, 1 DRb server) and go from there would be my recommendation.  

So, on top of that say I was trucking a 500 meg file over, do I need that much memory swap space to really make it move faster or at all? Or is everything limited anyway to just 4096 bytes a sec like I read in the File Dir api

I know that the files are loaded as temp first but so far with the one druby and one mongrel all files just stop uploading by the time they reach 98. .. % or even 99.67% it varies but no error appears in the logs.

So to be blunt. buying up say 400 more megs a month, hell even 800, does this enable the access to upload larger files more successfully ? Or am I looking at another means ?

I myself but mainly the boss needs to know if and why This excess amount will help if at all.

In this particular situation, I don't think extra memory on the shared system is going to do much good.  The shared environment has to keep strict control on its processes in order to provide adequate service to everyone.  

For something where you need this kind of power, a dedicated server is your best option (and isn't much more expensive than if you buy a ton of memory on a shared server).  A dedicated server is going to allow you to ensure that your processes can reliably handle long term transfer connections.

and does hostingrails have this dedicated server ?

Yes - see this page for more details.