This is normal. It is somehting to do with memory being reserved for hardware... have a look at the following link, it.'s for vista but applies to XP too: http://support.microsoft.com/kb/929605/en-us
Hope this helps.
You can only see 3.25GM of RAM because any 32-Bit OS from Microsoft by default does not support memory beyond 3 or 3.2GB max. You either go with 64-Bit OS to utilize 4GB memory or if you want to use 32-Bit OS, you go with either of the fixes that I am stating below:
1- Extend your OS Physical Address allocation manually via command line to support RAM more than 3GB. I would refer you Microsoft's support page here for Physical Address Extension so that you can not only understand what the glitch with Microsoft's 32-Bit OSes is but also learn how to resolve it.
Also refer to this: Enable 4GB RAM in 32-bit Windows Vista.
2- The other way is, there are patches available for Windows XP/Vista and Windows 7 by Microsoft to resolve memory extension issue. These patches are availble for free on Microsoft's website.
Hope this helps. Thank you, have a nice day!
Intel Go Green, Save The Environment!