I have Java7 running on 32-bit Windows and 4 GB RAM, but:
java -Xmx4G -Xms4G -jar Minecraft.jar
java -Xmx3G -Xms3G -jar Minecraft.jar
java -Xmx2G -Xms2G -j
If you go thru this IBM link on java, it says that on 32 bit windows the recommended heap size is 1.5 GB and the Maximum heap size is 1.8 GB. So your jvm does not gets initialized for -Xmx2G and above.
Also if you go thru this SO answer, clearly the DLL bindings are an issue for memory reservation changing which is no trivial task. Hence what may be recommended is that you go for 64-bit Windows and a 64-bit JVM. while it will chew up more RAM, you will have much more contiguous virtual address space.