I would first and formost try to seal up the home to the best of my ability. Weather seal the doors, caulk the windows and any other places. Get a candle and be careful, hold it against or near windows and see if the flame begins to wave around. This is a good leak and draft detector.
Before I get lamblasted, make sure you take all precautions and not start a fire.
Try to tighten up the home and seal it up.
Then, remove as much debris in the attic that is compressing the insulation. Insulation must be nice and airy or fluffy to work properly. If its weighted down or steped on and compressed, it is not working.
Check out your home center. You can re insulate it quick by using the celouse method and this can be done in one day easily with the help of a friend. This stuff sells for $4 a big bundle and with 25 bundles, the machine is free. One in the attic spraying and one on the machine filling the hopper with the stuff. I forget how many feet a bale will cover, but it depends on your area compressed, the r value your achieving, and the size of your ceiling joists.
You can get your home in much better condition under $200 if you do it your self.
Now, there is the other option of laying batts of insulation in the attic running them between the joists. This is back breaking work and the next day, you will be in pain and maybe need drywall repairs.
This is probably the most effecient method, as the fiberglass has a higher r factor and does not require as much.
In your condition, anything is better than what you have now.
Just some thoughts.
I am sure that you have heard about the natural gas prices for this fall and winter, so you had better get a move on my friend.