You'll have to get the plans engineered to make sure the bottom floor can support the top floor. It's easy to add studs in the lower level, but the single story foundation might not be up to the task, especially if it's old enough to not contain rebar.
I do design/build in Olympia and am currently adding a second floor to part of a client's house, my engineer designed in some impressive first floor hold downs and shear transfer straps etc. to make it work on a standard single-story foundation.
400 sq.ft. is pretty cozy, I have a 600 sq.ft. studio over my garage and it's cozy for two. Cost $20K to build the garage/studio DIY with some salvaged materials. It's heated with a propane-fired wall heater, direct vent, standing pilot. The water heater is a battery-ignition propane AquaStar on-demand and so work when the power's out, like last night.
One thing to do for making it more efficient is lots of air sealing and lots of insulation. Look up the insulation requirements for Energy Star homes and you'll see what I mean.
The Energy Code is available here:
http://energy.wsu.edu/BuildingEfficiency/EnergyCode.aspxAnd if you do the worksheets you'll see what the tradeoffs are for different ways to meet the energy code.
There are things you can do even if you're not handy, like pull wires and install insulation. Not glamorous.