Vista is running fine now - not sluggish, not buggy, not a hog, games run as fast and stable as XP, and so on. Vista is a very popular choice right now among gamers and enthusiasts which tells you all you need to know really. There are still die hard XP fans who, despite having not tried Vista or else having given it a quick look early on, will tell you authoritatively that Vista sucks. Trust me, these people are stuck in the past. Don't even think about trusting the Mac vs. PC ads on the subject. This is pure advertising BS from a very untrustworthy source but unfortunately this is all you ever hear on TV and is the dominating voice in the media. Steve Jobs also got up in front of a national audience recently and implied that Mac had an 18% market share when in fact it is less than 4% worldwide and about 8.1 % in US sales.
There was some truth to the criticism early on - pre-SP 1 - when the drivers were immature but those days are over. There are also issues in enterprise computing which have a very complex ecosystem that in some cases is still not compatible with Vista.
Having said all that there is no compelling reason to move to Vista because it just doesn't do enough for you that XP doesn't. You will get DX 10 for advanced game graphics, much better security, and a much more attractive appearance, and some other under the hood improvements of marginal value. The usual rule of thumb is that when buying new PCs get Vista but stick with XP on older systems. Some older systems may also have hardware that is incompatible but you usually have to go back 3 or more years ago to run into that.
Now if you want to use all 4 gig of ram you will need a 64 bit OS. With either Vista 32 or XP 32 you will only see about 3 to 3.5 gig of usable ram (in your case probably only 3) and there is no way around this. This fact has led recently to the great popularity of Vista 64 as an enthusiast platform. XP 64 will do it too but support for XP 64 has never been very good and isn't getting a whole lot better because there just are not enough installs out there. Vista 64 is fast becoming the new standard and support for it is nearing 100%. A trip to Best Buy will show you that. Most of the machines on the floor are Vista 64. There are also a lot of so called geniuses out there who will tell you 64 bit is too new and incompatible for the average user and this also was true some time ago but times have changed and 64 bit has arrived.
You can download a trial version for free. I would recommend you try it first and see for yourself. There are also some older versions of popular software out there that may not work with either Vista or 64 so you might want to do a quick search on the subject if you have any pet pieces of old software you need to run.