Increase page file or buy RAM?
Solution 1:
Accessing primary memory (RAM) normally takes in the order of a nanosecond (10-9 s) while accessing secondary memory (hard drive) takes in the order of a millisecond (10-3 s), making RAM access faster by a factor of 1,000,000 times. So to the extent that RAM is actually full and files are getting written to your hard drive's page file, those operations take 1,000,000 times longer. One would need to check the Task Manager to see what is going on and if RAM is actually full.
Your decision will depend on what you subjectively deem to be acceptable for the task you are using the computer for. You are certainly not using it for office work?
Solution 2:
The only way your machine could have gotten faster is by the paging file getting relocated to a less fragmented part of the disk when you changed its size. A common problem in general on old XP machines. Get a further possible improvement by using a defrag utility first, then run the SysInternals' PageDefrag tool.
It matters a great deal since you'll be using the paging file a lot more frequently with this little RAM. A fragmented paging file causes a lot more disk head seeks and that's slow.
Solution 3:
With a PC that old, it's likely that the rest of it will die soon too. If it's even possible to find RAM for a machine 10 years old, you'd probably be far better off buying a cheap desktop to replace it.
Solution 4:
More RAM is always better... But why invest in more memory if you feel the performance is accetable? You might actually have an issue finding memory for your machine at a reasonable price. You would be better off investing in a new machine.
Having a 4 GB page file will not cause extra wear and tear, however, that does seem excessive for 256 MB of RAM. You can most likely reduce it to 1 GB and be just fine.