You must have a 32bit OS.
That means there is no way it will read more than 2.75-3.2GB of ram. It is a limitation of 32bit operating systems and there is no way around it.
I suggest you do one of three things:
1. Buy a 64bit OS
2. Exchange it for 2GB of some name brand RAM (eg, crucial ballistix)
3. Keep it and only run 2.75GB.
I would personally go with the 2nd one if i were you. But your OS will not 'see' any more than that...