Go with 7, I do fine on 2GB in games, you'll be fine. If it's still a bother, give this a try: http://download.cnet.com/Game-Booster/3000-18512_4-10913645.html
Useless program.. because in any case, Windows will move the processes from RAM to page file, as you load the game, when low in memory.
XP drivers will (often but not always) have had more development and bugfixing, but DirectX9 differences will play a role too (this being emulated in Win7). The virtualisation of the graphics adapter and moving the graphics driver out of the Windows kernel are other factors as noted by GB above - the latter is probably the bigger cause of performance differences. When Windows NT was originally released, the video driver ran outside the kernel but this was changed with NT 3.51 to improve performance - taking it back out may help stability (unnecessary for a *cough* robustly-coded driver) but does create potential security problems (as one process can then access and modify data held on the GPU by another process). As to which OS is better - what applications you're running should be the deciding factor rather than hardware. Win7 has caused problems aplenty with older games for various reasons (missing DirectDraw functionality - workaround shown here, UAC blocking writes to Program Files, 64-bit Win7 unable to run 16-bit code without virtualisation) so if you have a large games collection, XP is more likely to be your sweet spot. On the other hand, there are features like 3-way SLI, multi-monitor SLI or GPU hotswapping (Optimus) which rely on WDDM so aren't likely to become available in XP (or Vista in the case of Optimus which requires WDDM 1.1).
