RAM is the 'energy' your computer will use to perform actions. 256 MB used to be a lot, and was more than it needed for Windows 98, IE5 and IE6.
But now, with Windows XP, and IE8, and Outlook and such, it needs a lot more 'energy' to perform all the commands, since the programs themselves are so much larger and more complex.
The 'virtual memory' bit that you changed, is more for cache, for the section of your hard drive that the computer will use for recurring information. Cache is like a temporary library. So say that you're loading a page, it will first check the cache to see if it's already there. Then it doesn't have to download every single image and other bits of content again. Increasing the cache means you'll have more space in your temporary library, but it doesn't increase the 'energy' your computer has to perform the complex actions required of current browsers and mailers.
The cache thing is most useful for websites that don't change their content. For instance, if you're reading a page at wikipedia, it'll put that page in the cache, and next time it'll load faster because it's already there. But here at pets.ca, the content of the page changes constantly because there are new posts, new topics, etc. And for that reason, pets.ca (and the vast majority of online forums) have back-end code that forces the cache on individual computers to refresh to the most *current* page. So with this topic, for instance, this page has been forced to refresh each time you opened the topic.
Say that you're going to be working off-line, then you can use the 'cache' to see pages you've viewed before going off-line. This doesn't mean you're actually going online to see the page - it means it's 'remembering' the page and showing to you what it remembers. By increasing the cache, you'll be able to 'recall' more pages when you go offline, and it'll be easier to load static web pages when you are online.
So basically, all this said, if you're using Windows XP now, you're using the latest version of Outlook and you've upgraded Internet Explorer to version 7 or 8 (or you're using Firefox version 3-something), then 256MB simply isn't enough for the computer to juggle all the actions it needs to perform to use these programs.