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Lung surfactant (LS) is a complex mixture of lipids and proteins that reduces and regulates the surface tension in the lungs, thereby decreasing the work of breathing. A thorough understanding of LS function is critical to the development and optimization of synthetic surfactants for the treatment of neonatal and adult respiratory distress syndrome. We have utilized coarse-grained (CG) molecular dynamics simulation to study the dynamic, hysteretic changes occurring in the structure and phase of model surfactant mixtures with varying temperature, pressure and composition. In particular, we have studied the effects of the LS components palmitoyloleoylphosphatidylglycerol (POPG), palmitoyloleoylphosphatidylcholine (POPC), palmitic acid (PA), cholesterol, and two surface-active proteins SP-B1-25 (the 25-residue N-terminal fragment of SP-B), and SP-C on model surfactant monolayers containing the primary lipid component dipalmitoylphosphatidylcholine (DPPC). The results indicate that POPG, POPC, SP-B1-25 and SP-C act as fluidizers and PA and cholesterol act as condensing agents, which change the phase-transition temperature, LC-LE phase distribution, and the extent of hysteresis. To explore the role of LS proteins SP-B and SP-C in storing and redelivering lipid from lipid monolayers during the compression and re-expansion occurring in lungs during breathing, we have simulated 2D-to-3D transitions at the interface. These simulations show that at near-zero surface tension the presence of a fluidizing agent, such as POPG, SP-C, or SP-B1-25 decreases the monolayers resistance to bending allowing the monolayers to form large undulations and ultimately folds. Another folding mechanism is also observed in monolayers containing peptides, involving the lipid-mediated aggregation of the peptides into a defect, from which the fold can nucleate. The occurrence of folding depends on the hydrophobic character of the peptides; if the number of hydrophobic residues is decreased significantly, monolayer folding does not occur. In contrast, the addition of PA has a charge dependent condensing affect, which can eliminate folding. Our results suggest that the peptides play a significant role in the folding process, and provide a larger driving force for folding than does POPG. In addition to promoting fold formation, the peptides also display fusogenic behavior, which can lead to surface refining.