No. You do not NEED 4gb of RAM although you will note a performance differance of going from 2-4.
32 Bit Operating systems max out at about 3.5GB of RAM. You can fit more, but only 3.5 will be recognised due to some very complicated and technical reasons I dont understand.
64 bit Operating systems max out MUCH higher than 3.5. I cant remember off the top of my head but its WAAAY beyond what any gaming system could possably need, and what a lot of commercially available motherboards can handle.
Personally, I would opt for 4x1gb or 2x2gb sticks of as fast ram as you can afford, then use either 32 bit XP, 32 bit Vista or 64 bit Vista (forget 64 bit XP)
As a matter of note, I plan on expanding to 64bit Vista and 8gb of RAM when the january sales combined with credit crunch drives prices through the floor.