Hi, I have 490 MB of RAM, but in the task manager, while running firefox and some other stuff, it says i have 160 MB free physical memory, but it also says I'm using almost 500 MB of my swap file! How can I get Windows to utilize that extra RAM? :P

Here's what the task manager says:

Total physical memory: 490992 Kb
PF Usage: 492 MB

If I need more RAM, I'm getting some later this month anyway, but right now I only have 490 MB.

Task Manager. Urk. The figure at the foot of the PF Usage chart is in MB, all other figures are in KB, and the conversion factor is 1024.
PF Usage is a misnomer in Task Manager. But the figure at the foot of the Page File Usage monitor is the Commit Charge, which is actually the sum of RAM in use + Page file being used.
Commit Charge [KB] = curent total memory usage [of both RAM + PF][KB]. It is just the amount of virtual memory the OS has committed to the running programs.
Limit CC = Most of installed RAM + Page File size. Most of RAM? XP always keeps a variable amount of RAM in reserve. If you disable your page file you will see that CC Limit is less than Total Phys MEM [RAM] by about 50KB or so, the reserve. This rises rapidly as you have more processes running, probably because the OS calculates that there is a bigger chance of an emergency memory call occurring.
At bottom of TM you see that PF Usage number repeated as Commit Charge [Total]. The second figure there is Commit Charge Limit, now in MB ...[x 1024 to get KB].
So when you say you have 490992KB of RAM, and your "PF Usage" is 503800KB you can see that you are only using a tiny bit of your Page File. Of course, XP is not going to be using all of your RAM before it switches some allocations over to the page file. How much of your RAM is not being used? This is given by the Available figure. How much page file? Tricky.
And what is shown in the actual Page File Usage monitor and chart? I have no idea.
There is a lot of misinformation on the web about this, I've possibly added to it.

Why won't Windows just use at least 3/4 of the RAM without going into the swap file? I'm on another computer and it has about 1 Gb of RAM free, but I'm using 263 Mb of the swap file.

I used the memory restoring thing. It freed some, and Windows used it, but I still stay above 100 Mb free of RAM. Can I get Windows to use swap file only if it's extremely low on RAM?

If you are that concerned about swap file usage you can remove it altogether. I think Windows even then still manages to do some disk swap work, somehow, but that is something I would have to check with a monitor. Windows allots RAM according to program design/inbuilt memory demands, the commit charge, but then actively manages memory for the immediate demand. Doing things that way, it has to keep a fair chunk up its sleeve for unexpected memory demands. Some interrupts cannot be ignored/postponed. With only TM running mine keeps about 50MB in reserve [apart from Available mem], but that jumps to 100MB as soon as I open an app. I also use a separate disk for the swap file. It is on timed shutdown if no activity... I hear it wind up again occasionally, but if I have high mem demand stuff running it stays full on. Windows will run happily on 1/2GB, but some apps may cause it to give you a Running low on Virtual Memory warning. [Btw, you will often see on the web that VM is the swap file. No it aint. With memory management VM is considered to be ALL memory - it is called virtual because running processes are not actually getting the memory they asked for. Roughly speaking].

I did a registry fix on HKLM\SYSTEM\CurrentControlSet\Control\Session Manager\Memory Management, and that lowered my PF usage, and Windows seems more lenient to use more RAM. I'm going to get 2 GB of RAM later this month as I said, but my motherboard only supports DDR RAM, should I get a new mothermoard that supports DDR2, or is just regular DDR just as good?

I really cannot answer that question for you, in depth. Yes, of course it is better, that is why they designed it, but it costs more [a lil bit], and you will require as you say a new mb. A quick search will explain the differences in as much detail as you care for. It comes down to what you use your sys for, and if you , just you, will notice the difference. You would for gaming and CAD work, but never for everyday home pc work like networking, mailing, home accounting, or even for your average picture retouching work.
Comes down to money, and perhaps some sort of pride or satisfaction.
2GB is a fair jump from 1/2GB... and if you have a fast cpu you may notice the difference - your cpu will spend a lot more time doing nothing. I doubt that you are, or want to be, a full blooded gamer so just think a bit about why you are doing it.

remember that a new mommy board that takes ddr2 will most likely also need a new CPU, and depending on what you have now for a mommy board you may need a new power supply also ,for the p4 plug if you old psu doesn't have one !just a thought