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#11
If that game needs 8GB of RAM, it must be a terrible port. I think they list the specs as 2GB to 8GB just to be safe and because RAM isn't terribly expensive these days. I would highly doubt that game really needs 8GB of RAM.
A virtual XP machine needs 512MB to 2GB of RAM. You aren't likely going to run heavy applications or games within the virtual machine.
As far as RAM being used now, Windows 7 will attempt to use whatever it can. And a fair amount of it will be cached. On my laptop right now, with 4GB of RAM, there is only 100MB free...but 2.3GB cached. So, my actual RAM usage is only around 35%.