I start my computer (Windows XP) and I'm using roughly 35% RAM. This goes up to about 50%++ after I start my daily applications (browser, messenger and such). When I run Virtual PC, the RAM does not increase much but after I stop Virtual PC my RAM drops to about 30% in use. Is this normal as a result of the RAM allocated to the Virtual PC being returned or is there something wrong here?
Yes it is normal.
It is due to how garbage collection of unused RAM is handled.
Essentially, when programs are finished with specific memory, it may not be immediately returned to the system. Eventually, something will trigger it to be actually released back into usable memory (Could be time, higher memory usage, etc). So, when you start Virtual PC then close it, somewhere along the line unused memory has been returned to the system.