Your research is correct, freemium conversion rates are very low. Those are the kinds of numbers you should expect, but if you do it right, you should be able to monetize fairly well. What you're talking about is the model for some very popular and successful web companies (think Google and WordPress) who make money by offering great products for free, and by promoting a variety of premium features (not quite the same as a free vs. premium model).
One of my favorite examples of this is really a project owned by WooThemes called WooCommerce. It's a free WordPress E-Commerce plugin, but they offer dozens of premium plugins that add a little bit of extra functionality. Their core product (which I should note is very good) is completely free and very well documented for editing. However, I've now spent several hundred dollars with them on premium upgrades for myself or for my clients, and I know thousands of others like me have done the same. It's true, I could make the modifications myself (or pay to have someone else do it) but why would I do that when I can pay $50 and have it ready five minutes from now?
If you go a similar route (inexpensive, simple addons) my guess is that you could do quite well. If you want some more personalized advice, let me know.
Hope that's helpful!