In 32-bit Windows XP, the maximum amount of virtual memory for an
application is 2GB. In the link below, you can modify the system to
increase the amount of memory available to applications.
WARNING: As stated in the article, your system can become unstable
since many device drivers assume the default settings. Your system
can even become un-bootable, which will require you to boot into safe
mode to undo the changes. Make a backup before any changes!
On my machine, after I made the changes, Photoshop now has about 1GB
more memory to work with.
Here is the article:
When I used the /3GB switch alone, my system booted up, but became
unstable. I had to use the /USERVA switch to fine-tune the amount of
virtual memory allocated. With some testing I found that a setting
of /USERVA=2900 resulted in a stable system for me. I've been running
this setting for some time now, and have had no side effects.