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Processor scheduling: This option specifies how CPU time is to be shared between processes. By default this is set to Programs, which indicates that foreground processes are a higher priority for CPU time and is recommended for most users as Application performance will be of primary concern. When set to Background services CPU time is more evenly divided between processes, which is more appropriate for Servers.
Memory usage: This setting controls the size of the file system cache. When set to Programs (Default) a standard sized file system cache is allocated (Less than 10MB RAM); this is recommended as it provides best Application performance. When set to System cache this enables the use of a large file system cache (Up to RAM minus 4MB!); this option is only suitable when Windows XP is acting as a Server not as a gaming system or for other Application/Workstation use as it will be detrimental to performance as Microsoft notes:
When you enable System cache mode on a computer that uses Unified Memory Architecture-based video hardware or AGP, you may experience a severe and random decrease in performance. The Drivers for these components consume a large part of the remaining application memory when they are initialized during startup.