The answer to all of this is that the older kernel does not support 2gb of ram but the newer kernel, the "-19-lpia" kernel, does. The reason that an update fixed this is that you had the old kernel, needed the new kernel, and the update supplied this. This kernel has been in the update stream since mid-Jan of this year.
His: Obsidian Mini-9: Karmic UNR w/ Vbox-XP, 2gb, 32gb STEC, 16gb Transcend(6), US-INTL, sgpstore carbon
Hers: Arctic Mini-9: Dell Ubuntu, 1gb, 16gb STEC, 8gb SDHC(6) Are you a Help Vampire?