If you need only a little bit of external memory of less than 256 bytes, then use the MOVX @Ri type instruction and P2 will then be available for normal use by your program. P2 is used by the MOVX @DPTR type instructions only.

And if you want to read DIP switches connected to P2, then all you need to do is write 0xFF to P2 ( and not drive them Low as mentioned by you )just prior to your read and then read the P2. Thats it - you dont even have to have the 'moderate' pull up resistors.

Raghu