Can I increase Windows XP 32bit's 3.5Gb RAM limit with /PAE? [duplicate]

Consumer 32-bit versions of Windows are limited to 4GB of RAM and PAE will not help you at all. As a side note PAE itself has been enabled since WinXP Service Pack 2 if I remember correctly, this was done to enable support for the NX Bit which is a security enhancement offered by PAE.

Windows is licenced by Microsoft and that licence includes a memory limit. In all home 32-bit versions of Windows the maximum limit is 4GB.

It is theoretically possible to use more, but in practice is it breaking the terms of your licence and may or may not break your system as well.

PAE does allow an operating system to use up to 64GB of RAM, but Microsoft chose not to allow it because it would break almost every device driver that was not PAE aware. They did this for your own good.

There's a SuperUser Blog post about this as well.