Wow.
Firstly, 32bit Windows, cannot address more than 32^2 = 4GB, that is total. That includes addressable memory from the HDD, GPU, RAM, Sound card etc etc.
If you install 4GB of RAM, you will only be able to address (read: use) 4GB minus the 1GB on your GPU, minus about another 500Mb for other stuff (sound, etc). If you install the additional 2GB you will gain, only 500Mb usable RAM (i.e. 4GB - 1.5GB = 2.5GB = 500Mb bonus).
You need a 64bit OS to use that ram, otherwise you are wasting your time.
4GB system RAM makes a massive difference compared to your slow hard drive that will be smashing along reading the PF.
Secondly, there is no, repeat no, issues with 64bit Win 7 in terms of hardware.
Thirdly, DMGreir Ubuntu etc overcommits RAM, so the limitations will not be 'seen' unless all apps call the memory at once. In Windows however, it doesn't over commit, so you will see massive performance drop as it will proxy to the hard drive page file. Also, you are using onboard GPU, not one with 1GB VRAM. Makes a massive difference.