I also am doing fine with 1GB of RAM (on a 3.0 GHz machine with a 7600GT).
To help matters, I use a utility called FSAutoStart to unload all but the critical items from RAM, leaving me with over 700 MB of RAM to run SH4. It is slow to start and exit as some have said, but that's not a real problem. I have all the graphics options checked except for post-processing filter.
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