If I want to upgrade my 1GB linode with another 1 GB of ram I can't. I can get 360 MB more for $20 a month. Why would I upgrade RAM when for the same price I can use a 2GB linode. I'd rather just add RAM to the one I have why can't I do that?

I don't think Linode like extras. Extras make managing the hosts far more difficult as it messes up the neat uniformity of having a known number of known configuration Linodes on each host.

It's probably better for Linode and it's definitely better for you if you go for the next plan up rather than using the extras.

How is adding RAM to an existing Linode any different than resizing an existing Linode from the customer perspective? In either way you have to reboot your machine and end up with more RAM.

It's a feature of XEN that you didn't need to reboot your virtual machine to add or remove memory. I don't think Linode was ever setup to take advantage of this though. It's a really cool feature but rarely used anywhere from what I've seen. I know it exists but still don't use it at home or at work.

http://wiki.xen.org/wiki/XCP_FAQ_Dynamic_Memory_Control

That support relies on memory ballooning drivers. Unless I'm mistaken, such drivers, which are at best a clever hack, will cause your system to misreport how much RAM it has. If you set a maximum limit of 2GB of RAM and give each linode 1GB of RAM, it would look to the customer like they have 2GB of RAM that starts out 50% consumed...

Unless they've resolved that through a bunch of extra hacky stuff, it'll just look pretty crummy to customers.