You seem to have no idea how to close programs. 512 MB isn't enough to run a bunch of junk on your computer. You have to use virtual memory, which is a swap file on your hard drive, if you use more than 512 MB. Since your hard drive is much slower than your RAM, you've got severe slowdowns.
What you want to do is get rid of most of your startup items, uninstall bullshit like iTunes/Quicktime, and use the better alternative of Winamp/MPC/QT Alternative. Ideally, your msconfig should only have maybe 4 essential items, like perhaps a sound device, and anything else you feel you can't live without.
You can also get rid of quite a few services, check out black viper's service guide, or www.tweakguides.com for more stuff. It's pretty dumb what windows puts on there.
To give you an idea, my desktop boots with 200 MB used, and has 20 processes running. To check it out, press ctrl alt del, and look at the "commit charge" number.
If you're running out of space frequently, consider increasing your pagefile, as detailed in tweakguides' tweaking companion. Personally, I don't use a pagefile on my 1 GB laptop, and I shouldn't have one on my 2 GB desktop, but I happen to have 600 GB, so an extra GB is easy.
If you want a very clean windows install, follow the tweaking companion. Otherwise, everything Falkoner told you is still a good idea. I recommend Ad aware, AVG, and regcleaner.
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