Yeah, but how heavily do you use it? I mean, do you run memory hungry programs, or several apps at once? Or do you run any services on it? In my experience, unless you are simply running a "check email/browse web/occassional app" desktop, anything below 256 runs miserably slow - slower in fact that older windows o/s's like 98 (no doubt due to the bloatware bundled with XP)
I run 1gb RAM on an XP 1800 (AMD) and it purrs with no lag at all, even when running apache, mysql, norton, firewall, p2p, vnc, ftpserver, and not to mention photoshop/ultraedit/browser/email and whatever else I am using.
I assume you both use XP Pro, and not Home? I must admit I have never used Home, so don't know if that manages it's RAM better.