If you dont want to spend on a memory upgrade then download a free little program called Ram Idle from TweakNow.com which will reclaim idle ram when your free ram goes down below a critical level which you can define yourself.

256MB is quite sufficient to run XP plus accessories, the problem is that other programs lay claim to big chunks of your memory even though they are not using it. If XP were a better OS then it would have a Ram Idle type program built into it to manage your memory efficiently.

The program shows your free ram at all times in the taskbar. Even when I am running many programs simultaneously I never run out of memory and I have only 256MB too.