Windows XP: 4GB to 16GB RAM upgrade
Solution 1:
You are right in that the 32-bit edition of Windows XP is limited to a maximum of 4 GBs of RAM.
The difference you will find with the 64-bit edition for Windows XP is that it's difficult to find hardware drivers for it, and some software simply isn't compatible. You'd probably be much better off running the 64-bit edition of Windows 7 (don't waste any time with Windows Vista, it's like a persistent yet inconsistent problem child) and virtualize Windows XP in VirtualBox.org to run any applications you have that aren't compatible with Windows 7.
Solution 2:
I typically compress a ton of files at one time.
It sounds like the real bottleneck in that case might in fact be hard-drive I/O.
Compressing many files at the same time causes a lot of overhead, lots of seeking on spinning-platter drives, and, on certain file systems (FAT32 especially), tons of fragmentation. I would recommend serializing such tasks–if at all possible.