Ah, you misunderstand pagefile and virtual memory. It's horrible. Definitions all over the internet are inconsistent. They are not the same thing. Or rather "virtual memory" has two meanings.
With XP, 2003 or Vista 32-bit, memory is limited to 2GB for ONE application. This is the so-called "USER address space". WAIT FOR IT... the kernel has the other half of memory. The maximum of USER plus KERNEL is 4GB.
There is a switch called /3GB. What this does is REDUCE the kernel space, so that MORE USER MODE address space is available. GAIN: Single application. LOSS: kernel. In practice, this is GREAT for desktop use, but a complete disaster for a server, which requires kernel space for each connection, each thread, each application etc.
Virtual memory = the memory, that is part of the pagefile, that is over and above the physical RAM that you installed, available for Windows to use.
Therefore physical+virtual memory has a maximum size of 4GB from the perspective of ONE application plus kernel. Imagine you strip your PC of all utilities and services, and run photoshop. You have 2GB for photoshop, and 2GB "for the system".
WAIT FOR IT.
But pagefile can be much bigger? Why? Because there can be MULTIPLE virtual memories. One for each application you are running. Each virtual memory space can be paged off to HDD. It should really be called paged virtual memory.
But why isnt it? Because at any moment in time, which of these applications is running in "virtual memory" or "paged virtual memory"? It is always changing. So we just call them ALL virtual memory.
Complicated isnt it? Hope that makes sense. There's a lot of info on MS site i you want to delve deeper.
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Set up your pagefile on your PRIMARY HDD. (Why, because you dont want it to go into sleep mode and lag while the HDD spins up). Make sure your pagefile is defragged. I lock my pagefile to a fixed size (2GB), so that it cannot grow and fragment.
Dont split your pagefile across multiple drives. If ANY of those drives drops into power save mode it will lag you.
You dont have to thave the pagefile on your primary system drive. In theory, it would be better to have it on another drive so that the PC can work the system directory and the pagefile simultaneously. But in practice, the gains are not worth the costs of having to HDDs spinning 24/7. Better just one (lower heat). And let the others sleep after 10mins to save power and heat.