A very famous myth actually. Vista loads files you often access into RAM for faster access, thus "blocking" your RAM. However, once your PC needs more RAM, that data is "dropped" (the virtual link points to the HDD instead of RAM again) and you can use that memory.
Windows 7 is using the same technology, the only reason why 7 seems to be less of a hog and faster than Vista is because of a very simple trick; Vista loaded the UI only after all the functions of it are finished loading, while 7 does the opposite.
That said, Vista and 7 are perfectly usable with 2GB RAM, I've been using them for years and updated to 4GB about a year ago, with no difference in performance. It was before I started playing FFXIV though, so I can't really say if 2GB is enough for OS + FFXIV
Most likely, the issue here was the GPU, not the RAM though.
