I'm running XP with only 512 megs.
I often have two Firefox windows open with ten or twelve tabs each, and sometimes more than that.
On top of that I'm usually running some kind of DSP code in the background.
I really don't see all that much obvious disk caching behavior.
That being said, I helped my son in law a little while back when his main laptop got broken and had to be sent back to the manufacturer under warranty.
His backup laptop was an off brand bought at Walmart (don't ask) and had a one gHz processor and only 128 megs.
It was like watching molasses flow in January in Fairbanks..
First thing I did was take control over disk cache size from XP and increased it to a gig.
Then I went to that auction site that may not be named and picked up a 256 meg module for almost nothing (I can't figure out why laptop memory is so much cheaper than desktop).
Between the two things that little sucker woke up and became a real computer you could actually do something with.
My daughter is taking an online course in graphic arts and has a 2.5 gHz Celeron with 512 megs. One of her classes was computer literacy and she was asked to tell what kind of software she had on her box. She told the instructor that when she clicked on All Programs it filled all the screen and ran off the right side. The instructor basically gave her an A...
Her box runs pretty well for what it is and she has a 10.2 megapixel Sony DSLR and takes a *lot* of pictures and often opens dozens at a time in Photoshop..
It hasn't had a reinstall since she bought it and that was about five years ago.
I'm really not sure if she even knows what a defrag is and I'm certainly not going to fool with it lest it disintegrate.