The bios updates from Asus simply run when you double click on those while in Windows. There are two types one for dos and one for all OSs generally seen at the support site. The all OSs version works like a winflash tool there.
It would be no surprise to see a 32bit edition of XP seeing problems with 4gb installed. XP was out before 3gb max was seen on boards then. Those running 4gb on the 32bit editions of Vista expect to see 750mb of ram mapped out to hardwares.
Whether in single or dual channel mode wouldn't be why you are being limited to 3gb of memory. It has more to do with limitations in XP's 32bit structure. A good article on the 3gb barrier seen even at times with the 64bit editions can be reviewed at
http://www.dansdata.com/askdan00015.htm