What to do?

Given they're giving you a brand spanking new machine for nothing, I'd stump up the £160 if 16gb is that important to you.

Like the others, I'd say 8gb will do but I do see the point about not being about to (easily) upgrade RAM on the new 21.5s.
 
Nope. I'm guessing he's had several repairs, and as a gesture of goodwill their offering to replace the machine with a new model? Just a guess however!

Good guess, in the space of 3 months i had several issues with the machine. The original failure could not be fixed after 2 attempts, so a new unit was offered. Pretty lucky actually as my applecare had only a couple of days left on it.
 
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