Yamaha didn't come out with the oil upgrade on the YFZ until the '07. As far as I know , no '06 came with the upgrade out of the factory. The upgrade consisted of a oil squirter and a 12 tooth oil pump for high volume. It's not the oil pump that is modded it's the side case that is, to accept the oil squirter. Here's your answers.
1)You'll have to pull the side case cover off to check the oil pump. If it's got a 13 tooth gear you don't have it, the upgrade oil pump has 12 teeth for higher volume.
2)I think some type of upgrade would be worth the money. PDR has the complete bolt on kit for around $300 with almost no down time because it comes with the '07 side case. I think J&T has the kit for around $200 but you'll have to send them your side case to have it machined to accept the squirter. Finally you could always do the "oil mod" and save even more money and time and the methed is still proven and being done to this day
You can speculate what the costs are gonna be to repair your quad all you want if it went apesh!t on you if it was caused by heat and friction at the wrist pin. Bottom line is once that wrist pin seizes your crank will say fu(k you, I'm still going and then, BOOM! New cases, new cylinder, new crank, Head damage, who knows it could cost up to$1500.
3)I have an '04 that was running very strong and I rode it pretty hard, WOT every now and then, hill shooting at the dunes stuff like that. I change the oil about every 5-6 hours as well as clean the filter. I just tore it down to do some motor work, the oil mod being one of them and the wrist pin looked like this:
4) I did the oil mod my self while I had the motor apart. I'd say if you have good wrenching skills you should be ok with the right tools. PDR has a sticky on installing the oul upgrade kit. Ultimately it depends on how much money you want to invest that will determine how long it will take.