You will see 3GB to 3.5GB in Windows x86, he has not used 8GB in Win2003.
Sure he has, Win2003 supports PAE, which does work by using 36bits, and is supported by Pentium 2 or newer. Theoretically it can increase the memory to up to 64gig. Its not particularly comparible with the /3gb switch.
There is a downside though, only applications which are compiled to be PAE aware are able to make use of the PAE memory pool, and it can introduce other issues with standard software. That said it's very good if your running massive Microsoft SQL server databases, as MS-SQL is compiled to make use of PAE.
So Thegondens brother is correct, and the extra bits... They are part of Pentium 2 and above. Oh yeah, if you have an Athlon or AthlonXP (32bit), you actually have up to 40 bits to play with not 36, so you can get up to 128GB with PAE on those.
PAE will also work on Core2 Duo's, and Athlon64, although im not sure how many of the 64bit wide memorybus are available to PAE on those processors. In theory all 64 of them.
BUT as I already said, for 99.9% of users PAE is completely worthless as most applications simply cant access the memory.
Finally in 32bit, windows itself limits any single application to 2GB of userspace memory, so even if you have 3.25GB detected in your 32bit windows, you pretty much "NEED" to be multitasking to make use of it. For a gaming system its pretty much pointless to go past 2GB ram.
On a 64bit XP, or Vista64, all this is thrown out of the window, with a full 64bit memory bus, and no practical limits on how much memory can be used by applications. (Well different processors affect limits, a Pentium IV with EM64T can still only access 48GB memory, as it doesnt have a full 64bit memory bus). I believe AMD64's can access 128GB memory, and I have no clue about Core2 Duo.
EDIT: Having looked into this some more, both the AMD64, and Core 2 Duo do indeed have full 64bit address space capability, but to improve windows performace, the 64bit versions currently only use 48bits of address space, as using the full 64bits would actually slow it down. This still permits an astonishingly huge amount of memory, more than anyone could currently afford, or even fit onto a standard ATX motherboard. By the time this is a problem (if it EVER is), both CPU, and memory performance will have inreased so far that increasing the address space wont cause performance issues.