Free RAM is RAM wasted. Vista manages its memory in the same manner of Unix, Linux, and BSD. It caches as much as it can in order to boost performance. Its why Vista opens applications nearly instantly and multi-tasks much more fluidly between apps than XP ever did or will do.
Incidentally, here's what your flat mate needs to do. Remove half his RAM and reinstall Vista 64, download the available updates including SP1, then pop back in the second 2GB of RAM. Vista does have its quirks, and this is probably the biggest one.