a 32-Bit OS can only use up to 3.2GB of memory.
to take advantage of the 8GB, you will have to use the 64-Bit version of Win7. Your product key will work on the 64-Bit version as long it is the same Windows version, meaning if you run Home 32-Bit the key will work on Home 64-Bit. You will have to do a fresh install.