According to my research in Microsoft's Developer Network and other reading, Windows 98/98SE will *use* a maximum of 192mb of RAM. After that (or more than that), it isn't used effectively, if at all.
However, the NT/2000/XP OS's use memory entirely different. Very efficient.
I just upgraded from Window 98 to Windows 2000 Professional. My computer is older, but I have the fastest CPU and most RAM it will take (P3 550 and 384mb). Win2k Pro runs *very* fast whereas Windows 98 was zippy, but not nearly this quick.
However, frames wise, I haven't seen a big jump as I'd hoped going from 98 to Win2k Pro. I seem to have gained 5 to 10 frames per second, that's it.
Wanna hear odd?
I have a Pentium 2 350 with 384mb of ram. I thought I'd try the same experiment...upgrading it to Win2k Pro. Wow, real kick in the pants, much faster now. This computer has a Voodoo 3 3000 AGP (16mb) and for some dang reason, its pulling more FPS (like 29~35) than the P3 550 with a Voodoo 5500 (64mb). Dang weird....
But anyways, I'd consider upgrading to Win2k Pro to see that RAM get used effectively. I wouldn't suggest going to XP until they have a Service Pack or two out for it. I've just never seen any rewards in being the first to jump into a new Microsoft OS
That's me, your mileage may vary