Unless you do extremely large or complex projects or HD, or have lots of very large high resolution images in your projects, 1 GB of RAM should be more than enough for most users.

Just as an example I only use 1GB and typically have Photoshop, Word, Agent (my news reader application), anti-virus, ACDSee and a few others things all running even while rendering and NEVER have any problems at all. System is responsive, no excessive page swaping or any sign of pushing it.

As far as your Paging File (Swap File) there are as many opinions as they are people posting them. Best advise, experiment. Some swear by setting the paging file size to a constant, others let Windows size it as necessary. It really boils down to how much physical RAM you have and if or not you use your computer for multi-tasking (running multiple applications at once) A very rough approach is to set the size of your paging file to anywhere from half the size of your RAM to double. Only watching Task Manager while doing your normal routine can tell if or not you need more RAM or a larger/smaller paging file.

If your hard drive seems to be grinding away more than it should, then delete your paging file, THEN do a defrag on the drive it is on, THEN make a new paging file. If you paging file gets fragemented, then only the largest section that isn't fragement gets used. Depending on your use it may make sense to set you paging file to a physical drive OTHER THAN your root drive. Again, you got to experiment and see what works best.

A good gage of how well Windows is using resources is check Task Manager to see the ratios between Total/Limit/Peak under Commit Charge under the Performance tab.

Using XP I have my paging file set to 1.5 GB. So with 1 GB of physical RAM my limit is 2520260KB. Total respresents the combined RAM and virtual memory presently in use. The value under Peak is the highest amount used since you last booted.

Under Physical Memory you see how your actual memory is being used. System Cache is a chuck that Windows sets aside for its own use. Under Kerrel Memory you see the relationship between what can and can't be run in physical memory. For example some drivers and even some core componets of Windows MUST use physical RAM and can't be paged. As a very rough guess when your system is in heavy use, (you're rendering and also using several other applications) the System Cache should still be roughly 1/4 to 1/3 o you total physical RAM.

A good judge of if or not your need more memory is see what percentage of RAM gets used. Start whatever programs you typically use, then start a render. Now if the value under Commit Charge Peak is consistently above the total RAM you have installed, likely Windows is starving, since it can't use as much physical RAM as it could to run better. So it will switch things in and out of the paging file more then it ideally would. Increase your physical memory should help, allowing Windows to use more of your physical memory for its cache. This mainly is a factor if you multi-task, not as much if you don't.

Remember, for any computer to do anything it must move instruction code, data, in and out of physical RAM. If it stars to run out of RAM it gets forced to swap in and out of virtual memory more often.