I'm late to this party but Agree with the above and add
Some games manage memory poorly but XP deals with it as you describe (An improvement on crashing as in older versions) Worth a google on the game and the issue to see if you are not alone on this.
You don't say how much memory you have. 256MB is a realistic minimum with XP and at current prices getting or increasing to 512MB is still good value if you play games, edit pictures etc.
If you edit movies, encode/ work with large music/sound files or do really detailed photoediting with lots of undo stages then you could follow me up to 1.5GB. I would say that is overkill as I rarely see more than 1GB of physical memory in use but I've got it now and things do buzz along very smoothly when playing with 300MB files
Regarding the second hard dedicated (i.e. empty) drive.
1) This is better than the c:drive if it is BOTH reasonably fast AND not on the same channel as the first HDD (where they will trip over each other anyway)
2) You are advised to leave a small virtual memory space on C: for the day you remove or lose access to the other drive and otherwise may not be able to boot (supposedly - not seen this myself)
3) BUT ANY disk is many times slower than the cruddiest memory - the virtual memory debate started when memory cost a weeks wages, It is a bit cheaper now.
If you have enough physical RAM the place where the VM/disc cache lives is irrelevent, In my experience windows XP will copy(mirror) a bunch files there so as to be ready to drop them from physical memory but never actually will drop them in normal uses and so never reads the disk versions ever again.
4) The advice on relative sizes for large memory/cache is oft quoted, but my real life experience suggests no more than c 300MB of 'disk memory' will ever be used. The 1x+ rationale relates to history when 64MB was a bit leading edge and has survived to allow saving of large de-bug files on crashes which is not a popular or necessary thing to do happily.
5) Short answer Unless you have over 512MB already get more memory! If you have 512MB+ get a game patch!
HTH