Probably something Microsoft Virtual PC specific as I've not seen this mentioned before and it puzzles me why disabling this at the host level makes a difference. I understand a change in the guest and actually do see it mentioned that it might help for some vSphere guests.
I can't possibly answer this without knowing what your workload demands are as it is completely dependent on what you are running in your VM. Windows XP itself only needs about 512MB to run and can be tweaked itself to use less resources.
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Wil