The PFD you are referring to is called an inflatable. As you guessed, they use a cylinder with CO2 to inflate the PFD.
There are two basic kinds, manual and automatic. The manual kind required you to pull a lanyard to inflate. The automatic have a disc that dissolves when you hit the water and then automatically inflates.
Some of the inflatables have built in harnesses for use with tethers.
I recently bought a manual inflatable right here in Sailnet. The one I bought is here:
It was on sale when I bought it and is comes with a whistle and light.
It is comfortable and I wear it when racing, single handing, or feel like I need it.
I don't know much about the re-arm kits, but I believe they are pretty cheap.