Yes, if you want to support more than 3.5GB of RAM then go for 64-bit version of O/S. Any 32-bit O/S will not support more than that due to architecture limitation. A quick browse through this forum will show you why is it so.

I don't think there's any need for the Ultimate version if you're only playing games. I'm using Vista Ultimate now and I rarely use the extra features of Ultimate. I'd go for Vista Premium if I were you.

And to answer the question, I think it's better to go for Vista Ultimate. There's not much performance difference between XP and Vista currently. The feature that slows down the game is the DirectX 10 code-path. You can run the game at the DX9 code-path and it'll run just like how it runs in XP. Currently the drivers are developing more maturely and the performance difference between XP and Vista has been decreasing significantly.

There's always integrated graphic processor.

From my experience of using Vista, it supports almost all the programs needed for my studies (Visual Studio, Photoshop, MS Office, AutoCad). The software supported by Vista has been increased significantly over the past 2 years. Now a lot of software has support for Vista