Kernel Questions

I have some basic questions about the linux kernel and making changes to it.

First, I have RH v5.1 with kernel 2.0.35. I notice that all the RH kernels seem to be 2.0.x. Yet at ftp sites like sunsite and others, there are many 2.1.x kernels that can be downloaded. I have been led to belive that the 2.1.x kernels contain more advanced features than 2.0.x versions (e.g. more recent drivers). What is the difference between these two kernel versions?
I understand that certain advanced features can be downloaded as patch files which can be included in my existing kernel. My view is that these patches become permanent additions to the kernel. Alternatively, I believe that kernel modules can be downloaded which are then automatically loaded by the kernel only when needed. Is my understanding correct? How do I recognize a patch from a module file (is there a naming convention?)? When I download a module file, how can I install it such that I can make use of it using kerneld?

TIA,
Steve Ettorre