I'v been reading about this patch.. I'v actually installed all MS updates & SP1 and Vista still only recognizes 3.5 gb in my system.
Don't worry about it. There is nothing you can do on Vista or XP to use all of your 4 gig of RAM except install the 64 bit version. Period.
SP1 is supposed to report that you have 4 gig installed but that's all it does, report that it is there, it does not actually use any more than before.
Not sure why your system only reports 3.5 after installing SP 1 - unless you are looking in the wrong place. System monitors and RAM usage meters will still tell you there is 3.5. You will have to look under system properties in Windows to see any reference to 4 gig installed.
Your missing RAM is caused by the need of a 32 bit OS to reserve address space for other device have memory on them, such as video card for example.