I just went through the same thing. I bought some memory from E-Bay. I was able to get 8mb flash for under $20. There were 2 flash slots in mine, so you could probably use 2 8mb flash units to get 16mb. I got 16mb RAM on the same order for under $10.
Once I installed it, I received a memory error with the new flash in it. With some help from this forum, I found out that I needed newer boot Roms to support the newer memory chips. They were $50 on most of the sites I looked at, but again Ebay came to the rescue. I found it new in box for $7 shipped. After installing the new boot roms (rev 11.?), the memory chip worked fine, and I was able to flash it to 12.1(2) IOS. For newer IOS's, you will probably need 16mb.
Hopefully this is clear.
Good luck,
Paul