"I'm not surprised you are getting "insufficient memory" messages if you are processing raw files on a machine with only 256MB of RAM."
I didn't know Windows XP could even run in so little memory. You live and learn.
Scampo/Steve is half right. Windows XP does have virtual memory paging, so if an application uses more memory than is available, it will page out to disk information it is not using. But, and this is a big but, the overhead is huge. Quite simply virtual memory paging can slow a system to a crawl. Really the best most effective way to speed up a PC is to buy more memory. I think 1 GB is the bare minimum with XP, and 2 GB is preferred. I would go for 3 GB but my damned motherboard only has two slots with a maximum of 1GB in each.
There is also the issue with Photoshop of where you put the swap file which can make a difference. (Google to find out.)
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