Microsoft has a special, cheap version of Windows XP for OEMs that is only for netbooks & this licence supports up to 1.5GB memory. It can support more memory, but Microsoft simply won't cover a license & will ask for more money per XP license if you decide to use 2GB or more.

Netbook manufacturers hope that Microsoft will let them use 2GB memory & not pay extra per XP licence, but for the time being Microsoft won’t let that happen, according to Fudzilla.

This another reason why Linux is so popular by netbook manufacturers.