Know the Ram in Windows 7

You can use PAE, but it's not nearly as good as just going 64 bit. Check this MSDN Page.

Enabling PAE

Windows automatically enables PAE if DEP is enabled on a computer that supports hardware-enabled DEP, or if the computer is configured for hot-add memory devices in memory ranges beyond 4 GB. If the computer does not support hardware-enabled DEP or is not configured for hot-add memory devices in memory ranges beyond 4 GB, PAE must be explicitly enabled.

To explicitly enable PAE, use the following BCDEdit /set command to set the pae boot entry option:

bcdedit /set [{ID}] pae ForceEnable

IF DEP is enabled, PAE cannot be disabled. Use the following BCDEdit /set commands to disable both DEP and PAE:

bcdedit /set [{ID}] nx AlwaysOff
bcdedit /set [{ID}] pae ForceDisable

Windows Server 2003 and Windows XP: To enable PAE, use the /PAE switch in the boot.ini file. To disable PAE, use the /NOPAE switch. To disable DEP, use the /EXECUTE switch.

Do you have more than 2GB of RAM?

Yes? Then stop caring!

XP and 7 use RAM in different ways. Right now on my Vista box (Which has a lot in common with 7), I'm idling at 54% used RAM. That leaves me with under a GB! That's not enough left to, say, play Crysis. So let's turn my page file off. Very little change. Let's go play crysis anyway.

Ran great, and now I'm idling at 30% RAM. Vista and 7 cache in your RAM, because it's about 40 times faster than most hard drives (not SSDs though, it's still a lot faster, but not as much), so it makes a lot of sense to use it to speed up your PC.

If you have less than 2GB of RAM, stick with XP. Vista and 7 are much, much faster than XP if you give them modern hardware.

As for the minimum, XP never really ran well on 64mb of ram, and win7 can run on much less than 1gb. Seems like MS have changed their mind about how they want their OS to be seen. Back when XP existed, fewer people had PCs, and there was almost no widespread internet, so they could (basically) lie on the packaging and nobody would mention it. Now they've put a reasonable figure that will allow Win7 to run as designed (caching and all).