Yep.. It will definitely help t increase traffic. The same effort if you apply for a .com,.net domain that it will boost traffic. Also Search engines consider .com,.net domains than .co.nr domains.
Yes, you can redirect new domain to the existing <username>.110mb.com...
Since you have are using 110mb.com, they support domain hosting. So after getting a new domain, you will get a control panel where you have to change the nameservers to ns1.110mb.com. Or another method is set a DOMAIN FORWARDING to your URL.