I have had many different levels of RAM (very expensive some years ago) for XP Pro which I have had for some considerable time.
512MB was a lot when I first upgraded to XP Pro over a win98SE installation at that point in time RAM prices were extortionate. When they reduced in price I went to 1GB and I did notice a difference in general performance.
On this relatively new system bought 1 year ago I went for 2GB, however there is no way to directly compare as the CPU (core2duo rather than single core AMD athlon mobile over-clocked), HDD (SATA2 rather than IDE) and NTFS format (rather than FAT32) were in their own right faster so no direct comparison can be made. But for me on this system with 2GB (and the other elements) the system fairly flies along

However the OS is only one element in the equation on how much RAM is too much (4GB as the theoretical max on a 32bit OS), and the other applications that you run regularly and or in the background are much more important than simply the minimum requirement for the OS.
The more memory you have the more that can be run in memory and the less need to constantly swapped out to the virtual memory (pagefile.sys) on your hard disk. It is this swapping out to the hard disk that is the bottleneck in many systems and the more RAM you have the less this is required.
So really it depends on what the end user uses their computer for.