I've had nearly the opposite experience with Dell, at least in my area (southern California). They have been very reliable and the service has been good. I'm not sure how their service varies in different areas though. I guess YMMV.

Anyway, as for the topic:
512MB will work with Window XP as long as you are conservative with your computer resources. In other words, load only what you need and nothing else. Even on a streamlined machine, 512MB will limit the computer's performance if you are running a number of programs at once. Most laptops have an option for memory upgrade though, so you could likely upgrade in the future if you ever needed it. (The laptop has DDR2 which is current, so you should be able to find a SO-DIMM memory upgrade for not a huge cost)