Wacky. We upgraded our EeePC to 2GB by just opening the cover on the bottom and replacing the DIMM with one from my old laptop; I guess the new ones removed that handy feature to save money.
I don't think adding an SD card will work, since it won't increase the RAM available to programs. You could create a swap file on there so RAM can be written out to the flash memory, but I don't know whether that would really be any faster than the hard drive, or whether the continual writes would just trash the card.