Stop it, stop it, stop it.
1: A 32-bit OS can only address up to 32-bits of space (4GB). Think of it this way: a bit can be either 0 or 1, and a 32-bit address is a combination of 32 stright 0's or 1's. That leaves 4,294,967,295 unique combinations (which happens to be exactly 4GB) that can be referenced by a single 32-bit string of 0's and 1's.
2: PAE implements the 36-bit mode on most newer Intel X86/X87 processors, which expands the supported memory space to 64GB. The downside is that the OS itself continues to use its own 32-bit address space and 32-bit instructions.
Think of it this way: In a 32-bit OS with PAE disabled, there is one address space that can hold 32-bits of data for the entire system and all connected devices. With PAE enabled, each process would get its own unique page table, in order to extend the address space to the supported 64GB. So even though up to 64GB is supported, each individual process can only access 4GB at one time, making PAE ineffective for singular processes that require large amounts of RAM. Hence, why X64-Windows makes much more sense, as it does not share this unique limitation of Window's implementation of PAE.
Worse, PAE at the OS level is unstable, at best. This is because all device drivers need to be written in such a way that the expanded address space and multiple page tables will not cause any instability. This, of course, is often not the case, and even one bad device driver can bring down the entire OS (hence why M$ focuses so much time ensuring device drivers are stable).
From Wikipedia:
In computing, Physical Address Extension (PAE) is a feature of some x86 and x86-64 processors that enable the use of more than 4 gigabytes[1] of physical memory to be used in 32-bit systems, given appropriate operating system support. PAE is provided by Intel Pentium Pro and above CPUs (including all later Pentium-series processors except the 400 MHz bus versions of the Pentium M), as well as by some compatible processors such as the Athlon and later models from AMD.
The x86 processor hardware is augmented with additional address lines used to select the additional memory, so physical address size is increased from 32 bits to 36 bits. This increases maximum physical memory size from 4 GB to 64 GB. The 32-bit size of the virtual address is not changed, so regular application software continues to use instructions with 32-bit addresses and (in a flat memory model) is limited to 4 gigabytes of virtual address space. The operating system uses page tables to map this 4 GB address space into the 64 GB of RAM, and the map is usually different for each process. In this way, the extra memory is useful even though no single regular application can access it all simultaneously.
For application software which needs access to more than 4 GB of RAM, some special mechanism may be provided by the operating system in addition to the regular PAE support. On Microsoft Windows this mechanism is called Address Windowing Extensions, while on Unix-like systems a variety of techniques are used, such as using mmap() to map regions of a file into and out of the address space as needed.
In short: While Windows could theoretically implement PAE to expand the address space to 36-bits, it is simply a far better option to switch to the more stable solution of switching to a 64-bit flavor.