Well, i can only comment on the RAM size issue as i haven't checked PC specs in a long time. Even if you have 4 gigs, you only get to use 3-3.5 unless you're running Vista. On the other hand, Vista is generally slower with games than XP service pack 2 in a lot of benchmarks. I don't know what happens with XP service pack 3 as i haven't tried it (leaving for the army in a few days and i can't be bothered to do a format and a clean install).
Nevertheless, i would get 4 gigs because 2 is barely cutting it with some of the new games, even if XP doesn't recognize all of your RAM. XP had some problems too but after the 2nd service pack it's been my most stable windows version ever. I suspect that at some point they will either fix Vista with service packs and you could upgrade to it, so why not have the RAM anyway? Even if they don't manage to do it, maybe they will release support for increased RAM in some XP update.
Hell, even if nothing happens, it doesn't hurt to have an extra GB of RAM, even when 1/4 of the total is going to waste due to XP. I think that since you're going for DDR2 it will be cheap enough anyway.