How far along can you get before you have to start paying for quests?
You can only go through the starter instances. Ered Luin and The Shire quests go up to about lv 18. Bree quests go up to about lv 25. With doing all the deeds in both areas, you can probably purchase the Lone lands quest pack or north down's quest pack. You can go to either place after Bree. Then you do the same for Lone Lands and North Downs.
Lonelands quests last till about level 35 if you do the GA instance. North Downs can last all the way up to lv 38-40, if you do every quest. Doing deeds in each place should make it so you can keep purchasing quest packs and eventually you'll have all you need.
System requirements are:
Windows XP,Vista, 7
Pentium 4 2.8ghz
1GB RAM
128mb geforce 6800 or ATI x850
10GB disk space
For the recommended, you can't really play that well on minimum reqs.