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It's usable, programs like word, excel and IE worked, software with bigger memory requirements Paintshop etc. were very sluggish.
Later I updated to 288MB, the improvement in speed was very noticeable, although memory hungry applications were still frustratingly slow.
Turning off everything in XP that you don't need - theme's, IR communications, etc. makes a huge difference.
I can remember getting a 386 with 16 megs of RAM inside. That was an upgrade from 8 megs. RAM cost $100 a meg back then - my point?
Buy more RAM, you won't be sorry. I build my own PCs and 512 is usually the minimum on XP, 256 is my minimum on Windows 2000 Pro.
The other little trick is to go to start->settings->control panel->system->Advanced tab and adjust the settings for best performance.
I do this with every pc I can, as well as boosting the RAM. Seems to work pretty well, and does away with the annoying flying graphics.
Once your hard drive is allowed to do it's job I would suggest a minimum of 1GB for most users (512 for grama if she's on a real budget). 2GB's are required to run everything plus world of Warcraft (I'm a heavy multitasker).
Just Internet - 512MB
Most People (no games) - 1GB
Moderate to Heavy Gamer - 2GB
More ram isn't good if you're still using your hard drive as memory. Disable virtual memory (the pagefile).
For one thing, doing this would waste a lot of RAM. When programs ask for some virtual memory they often ask for a lot more than they ever actually use. This space has to be allocated somewhere on the system. If you have a page file available, the system can assign it there, but if not, it gets assigned to RAM, and then you're tying up what could be hundreds of megabytes from any actual use.
Standard advice is to set your virtual memory pagefile at 2.5 times the size of your RAM. Some advocate more or less depending on how you use the machine.