To answer the small question rharv, Windows XP 32 bit maximum install of RAM is 4GB, however Windows actually only uses roughly 3.5GB of that.
Bearing that in mind I see no real point in installing more than 3GB in total.

I also will rub in the point that a new computer is actually the better bet as XP is rapidly approaching its end, and though even now getting hard to get I would stay with a Windows 7 64bit machine.
Windows 8 is such a major learning curve and as yet not sure if BIAB is fully supported, Peter Gannon will know more about that of course.

Whichever you finally do go for and sure as eggs is eggs you will eventually need to, I will recommend a computer with at least a quad core processor, enough space for extra RAM if it comes with anything less than 2GB and a decent sized and fast running hard drive. A hard drive that is a SSD even better.

However all of that depends on finances, I am sure the good folks here can point in the right direction depending on what you can afford.