Well, firstly I wish someone had replied earlier to this post than now.
Your system supports both DDR2 and DDR3 memory and the max memory differs with each type. With DDR3 the max you can install is upto 4GB (using two 2GB modules) and you can install upto 8GB using DDR2 (using four 2GB modules). And that's the reason why it recognizes only upto 4GB of memory. It is the motherboard limitation.
If you would ask if 4GB of DDR3 is better than 8GB DDR2 then the answer would be 8GB DDR2, just because of the extra memory advantage you would have. But seriously I would go with a new system which supports DDR3 with Overclocking capabilities
Note: You cannot install both DDR2 and DDR3 memory simultaneously.