i am using a core 2 duo computer which i assumed was capable of reading more than the memory limit for ram. what did i do wrong?
You assumed wrong. Why would a CPU magically be able to "read more then the memory limit?"
3.25GBs tells me you have a 32bit copy of windows. That's all your going to get. You'll have to get a 64bit copy if you want all four gigs. The difference between the two is real world nothing so I wouldn't worry about it to much.
Edit: Just looked at your pic, you have a 64bit copy. Look in your bios for something called memory remap or something like that. It should get you want you want.