Yeah, since it's Dell installing the 64 bit OS, and you're looking at 4 GB mem, I'd go 64 bit OS too.
But, are you going to play mame on it? If not, and no games, and no compiling, and no photoshopping, the CPU is a little overkill. Still, the better the CPU, the longer it will run future apps. So I'd keep it.
FWIW, microsoft's consumer 32 bit memory limit is as follows:
total main memory + total video memory + total "shared video" memory (if any) tops out at 4 GB.
It doesn't matter if the video is on a separate card on onboard chip. So if you have two 1 GB SLI cards & 4 GB memory & and a 32 bit vista/XP, you can only use 2 gigs of the memory; that extra 2 GB is just sitting there totally unused. OTOH, if you replaced the two video cards with an onboard chip that shares 16 MB of main memory, the video memory is listed twice, once in the actual 16 MBs of main mem it's stealing, plus the virtual 16 MBs at the top end. So the OS gives you 4 GB minus 32 MB (or 4096 - 32 = 4064 MB).
With the (256 MB?) onboard video chip, you won't be losing too much memory, but it will be some.