“4GB” maximum memory limit of 32-bit Windows is purely theoretical. In practice, the max memory is something significantly less, equal to 4GB minus your video card memory and the address space allocated to a couple other hardware resourcse. Typically, the realistic maximum memory is somewhere betwee 2.5GB and 3.5GB.
To answer your question, “does it have any effect on the OS or at the hardware layer to run in this configuration?”: It has no effect whatsoever. It’ll behave just like the unused memory wasn’t physically present.
From: http://www.vistaclues.com/reader-question-32-bit-vista-memory-limits/