Technically Vista is supposed to run on a system like yours, but it doesn't really.
But there are a few things you can do:
1. Firefox is a very good browser, but it's also a memory hog. If you're not using it, close it. It could free up as much as 150MB or RAM, as well as lots of CPU time.
2. AVG is the best free antivirus there is, but it has it's drawbacks. It too is memory intensive. Open the settings and set the virus scan to run when you are not using the computer, and to do a slower, but less memory-intensive scan.
3. VIsta. It's a problem, no doubt. One thing you can do is to turn off the Aero effects. I don't remember exactly where it is, but a quick and easy way to find it is to open the help and search for Aero. There is an article there about it not working, simply do the opposite to turn it off.
4. The Windows side bar is cute and a little useful, but hogs a lot of CPU and memory. Kill it. Set it not to run on startup.
5. Reboot at least once a day. Windows suffers from memory leaks. That means that when a process is ended, it doesn't necessarily relinquish the memory it was using. Rebooting helps.
6. Don't leave the computer running if you're not using it. VIsta boots up (relatively) fast, and in the long run it will pay off. Having the computer running when you're not using it (wastes electricity and) raises the amount and probability of memory leaks.
7. I had exactly the same problem that you do, which is how I came up with all this stuff. Eventually I got fed up and went to Linux. It's a stable operating system (I rebooted once in the past 3 months, and that was to update the kernel) and doesn't suffer from memory leaks nor (as many) freezes as Windows.
This one is called Mandriva, and the KDE desktop looks even better than the VIsta with Aero running, and uses a third of the computer's resources.
http://www.mandriva.com/en/download