(a) yes, if you later do a clean format and install Win 7 64bit, you'll be fine. you'll be able to utilize all of your RAM at that point. until then, on a 32 bit system, you are limited to approx 3.5GB of ram.
(b)Your graphics card won't be affected by this. However, i think the limitation of 3.5GB system memory in a 32 bit architecture includes your graphics memory. So, in a situation where your system is utilizing, say 500MB of your video ram, that only leaves you to use 3gb of your RAM.