To add a Palringo contact, the other person has to be a registered user. You add them to your contact list by entering the email address that they registered with Palringo.
'Add Service' allows you to use the Palringo client as a gateway for other messengers that you use, like MSN, AIM and in your case, Google Chat. If you want to use Palringo for Goole Chat, you select 'Add Service' and fill in the required fields, then your Google Chat contacts will appear and you can chat to them.
It sounds like your friend isn't showing up as online because he/she is not registered with or using Palringo... at least not with the email address you've entered.