My work laptop has 4GB of RAM on it and Windows 7 and it runs just fine. The only thing that slows it down is when the corporate-mandated management scripts run and start pegging the hard drive with virus scans, audits and the like. More RAM wouldn't help that. Switching to an SSD did.
According to Resource Monitor, I'm using about 3GB, with 850MB of that used as cache. A bit over 1GB of that is Firefox.
So, yeah, I could see 1GB really sucking when used with a modern web browser and many tabs open (like I do). 4GB, though, hasn't really held me back much.
Apparently, at least part of Vista's memory woes stemmed from the poorly tuned "SuperCache" feature, that would aggressively try to pre-cache data in RAM. Its appetite was apparently too large. It apparently also didn't manage its disk buffers very well. (This is all third or fourth hand knowledge and so could be shaky. I've never run Vista myself. If someone has more details, pipe up!)