Not enough ram?

Okay, i recently upgraded to windows xp pro, from windows ME…basically everything is okay except for adobe photoshop 7, when i try to to do a simple thing like fill in a marque it takes for ever, and i can’t even apply some effects, i get an error saying not enough RAM, although i never had this problem before…
I only have 256mb now, do i get this error because XP takes more RAM than ME did?? If so, about how much ram would i need now?