Any32 Bit OS such as XP, Vista, 7 can see up to 4GB however only 3.5 is usable. For instance my machine which is only about 8 months old, Running Windows 7 Pro 32Bit, has 4GB installed and only 2.74 usable, and that is with my graphics card turned down. unfortunantly an unwanted feature provided to us from microsoft. Even if your memory was added after the windows installation, the OS will recognize it, and make it usable ( up to the limitation of course). I searched the HP/Compaq Download/Support Page and was unable to find a bios update for your Compaq 500b at this time, therefore I can offer 2 suggestions, sit back and wait until one is released or call HP Tech Support and ask them when one will be released and explain your issue.
It may be as simple as the video card driver reserviing it for shared memory. Seems like a lot of video cards these days will share the system RAM. I would look in the advanced setting for your video card and see if there is an adjustment that could be made there. Other than that I have not seen the issue before.
First as said 32-bit can see 4GB, but in reality usable system RAM will only be about 3.2 Gig, that does not include the resources used by your video card, I have the 6150 graphics chipset in the tower I am using not, before turning off the Aero interface the graphics were taking about an additional Gig of RAM from system memory. Unfortunately graphics makers of integrated graphics, even those with dedicated Graphics RAM take large swaths of system RAM without your permission to improve performance.
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