Sent by Angel
Editor: With respect to your first point, you are absolutely right. In fact, a recent report by respected Forrester Research found that increasing building insulation offers the largest and most immediate payback. The biggest environmental cost of not insulating is invisible: it's the extra carbon that goes into the atmosphere that's needed to keep your house warm. This ongoing carbon gain quickly outstrips the one-time carbon added, for example, by replacing the plaster inside your house, or redoing the siding.
Fortunately, that's not necessary. Blown-in insulation can be installed from the inside of your house using small holes at the top and bottom of each stud cavity. Each hole will be patched afterward, and after a coat of paint, you won't even know they existed. We'd go with Icynene or another expanding plastic foam despite the plastic content. Note: foams marketed as "soy" are still primarily plastic. Blown-in cellulose can settle or, worse, not fill walls completely. Those little pockets can then trap moisture, which can cause mold and rot... and that's definitely not green.
With respect to the second question: we're not sure where you're located. If you're in a severe climate, the green thing would be to borrow a bit of money to get the insulation done, because you'll be spending the same money on fuel over the coming years instead. (You might go ahead and get a free bid -- a smart insulation salesperson will calculate the payback period for you.) Once carbon's in the atmosphere, it's pretty hard to get it out. If that's not an option, weatherstrip all the doors and windows, consider that window film stuff you shrink with a hairdryer... and turn down the thermostat and put on a sweater.
Image via TLC Energy Solutions