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I wanted to install XP on a second drive; Mostly to run older games, but im not sure how PAE works.

I wanted originally just to run it on a VirtualMachine but theres AV sync lag and Mouse lag, Im really picky.

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PAE allows 32 bit processors to address memory beyond 4GB limit. This is achieved using 4 additional bits for addressing (32 + 4 bits). With 4 additional bits 16 times more memory can be addressed (2 power 4 = 16) or in total 64GB.

How to set PAE - Available switch options for the Windows XP and the Windows Server 2003 Boot.ini files

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