Okay, so basically, there are two types of operating system, a 32-bit and a 64-bit. A 32-bit operating system can handle up to a maximum of 4 GB of RAM, however, after the system is done with that, there will only be 3.5 GB left for you to use. So, if you want to utilize all of the 4GB, I would upgrade to a 64-bit OS.
A 64-bit operating system also makes faster work of large amount of data, like video editing and stuff like that. As for gaming, as far as I know there is no significant speed or performance increase. However, take caution, some (very few, most run fine in 32-bit compatibility mode) older 32-bit programs may not run on a 64-bit OS even with the 32-bit compatibility mode built into the OS and some even older 16-bit programs may also not run.
However, if you have more than 4GB of RAM and would like to use all of it, you will have to go 64-bit.
Yes it's true about the 32-bit but you may not be able to use all 4GB even if you upgraded to Windows 7 64-bit. I tell you why - your motherboard chipset has to support at least 8GB of address space and your BIOS must support memory remapping so that video and hardware-allocated can be moved above the 4GB address point. I know this is Vista but this applies to Windows 7 as well http://support.microsoft.com/kb/929605/e... So you need to tell us what make is your motherboard if you can.
EDIT: Thank you very much - guess what you're in luck. Your BIOS support memory remapping. Scroll down to page 69 (2.4.4 Chipset) where it says 'Memory Remap Feature Enabled'.
When you do upgrade to Windows 7 64-bit, make sure you have this feature enabled. This manual will tell you where in the BIOS to find the 'Memory Remap Feature'. http://www.google.co.uk/url?sa=t&source=...
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