The rule with your Pagefile/Swap File, whatever you call it is 1.5 x your installed RAM.
However, this rule was never designed for RAM hungry 3D applications. As a rule SH3 modded or otherwise will not use in excess of 2GB of RAM, virtual or real. Therefore a base figure for real RAM @ 1024mb is adequate for the Stock game to run, however, that is the bare minimum. Having a Pagefile at a fixed amount allows the Operating System to allocate extraneous files (while running SH3) to that space allotment, thus freeing up resources for the game.
Bottom line is that you can set your pagefile to whatever you want, it's only dedicated HDD space that the OS uses to write it's memory to.
TBH though, I don't think it will solve the OP's problem. The GFX card is not up to the 8km world rendering.