2GB of RAM is pretty much enough.

I suggest you after format and install Windows Vista. Make sure you install SP1 first before install the rest. This method always help to improve the performance.

Some people complaint that after install the rest of the software then only they install SP1, this will cause the Windows to load slower.

Also disable the file indexing feature of Windows Vista, it will help. One thing that I like to turn off was the Sidebar. Well, if you not really fancy about the Sidebar, you can turn it off too. This really improve your Windows Vista performance.