512 to 1GB would give a noticable improvement across the board for nearly everything you do in WinXP and gaming, mainly in responsiveness (in windows/apps) and stuttering (in games). Adding RAM does not increase FPS in games except when replaced with lower latency modules. Even then, the increase is not usually noticable (1-3 FPS). What you will see with 1GB is shorter load times and possible alleviation of stutter/micro freezes caused by HDD access during the game.
1GB to 2GB would yield little to no improvement except in certain circumstances. Very few games to date utilize greater than 1GB, BF2 being one. Don't have it to test, but that's what I hear. FS9 hovers around 750MB usage on my PC with max settings, Il2/FB/PF around 900-1000MB. Only certain applications like video/sound editing or very large database apps or servers would exceed 1GB and benefit from 2GB (or multiple apps open, combined usage).
Certain chipset/motherboard models may actually lose slight performance when exceeding 1GB or when using 4 DIMMS. Some require reduced speed setting with 4 DIMMS in use (ex.: DDR400 must be set to DDR333), or it may induce added latency due to increased overhead required for memory management.
I know some people will swear by their 2GB in their machines, but I do not recommend it. Unless you have special circumstances, it's wasted money. I do, however, highly recommend 1GB. No more, no less.
That's my opinion/experience, for what it's worth.

I'm not taking into account Windows Vista, FS10 and other hardware/software we don't have yet. Things obviously change and 2GB may well be the standard in the near future. Not, IMO, with any machine bought before next April. lol