With XP, anything more than 2GB is a hack, and its not very usefull to 'general' users. It uses a mode called PAE, which is fine, but applications can only use it if they are specifically programmed to understand PAE mode.
So most applications can only access 2GB memory even if more is installed.
I do believe on a PAE enabled XP system, windows does know enough to allow multitasking to make use of the ram, so if you like a dozen apps open at once then it does have benifits, but if you close down your apps and have nothing but windows + your main app, then the gains for enabling the PAE hack are extremely limited.
XP 2GB Yes, it really makes a difference, but there are many good reasons why 2GB is still the normal 'max' thats worth installing in a 32bit windows PC (including 32bit Vista).
When 64bit Windows become standard, then 4GB will very likely become the new standard, as XP64, and Vista64 can access 128GB of ram, and thats purely a software limit, a lot more is possible in the future)
(Actually apparently Vista Home Basic supports 8GB max, Vista Home Premium 16GB Max, and Vista Ultima 128GB max) Thats kinda beside the point though as most current motherboards are limited to between 8 and 16GB of DDR2 memory.