Upgrade from Pearl 8110 question

I have only been with AT&T for 3 months of a 2 year contract. I got the Pearl 8110 and I love it, except for the 64mb memory, bottom line I need more. So my question is this, what is the best way to upgrade my phone? I don't care about the fact that i'll have to pay extra for the phone. But should I upgrade through AT&T site, or buy a phone on my own?

The AT&T site said something about buying a sim card, can I not use the sim card from my current phone?
Can anyone set me straight on upgrading my phone?