I had the Exact Same Problem.
First and Foremost - this is a Problem of Terminology. X-Plane is coded in the MAC Environment - maybe the term "Virtual Memory" in that realm is probably defined and used that way.
But In Windows Nomenclature - you are Not running out of Virtual Memory. In the Windows World, Virtual Memory is the Page (or Swap) File located on a HDD or SSD (Storage). Is has nothing (really) to do with (RAM) Memory. Virtual Memory is indeed used as a Poor Man's Substitute when your PC runs out of real Memory. It caches data that would normally reside in real Memory and has to (slowly) swap that information to the CPU. Virtual Memory (Swap File) is 100s of times slower process than real RAM communicating with the CPU.
What you are short on is Addressable (Memory) Address Space (Explained Below). Simply - this is the division of what Windows takes for itself, and what it allows for Applications to use. Even though you have 4GB of Memory, Windows is not allocating enough to X-Plane 10 for it to Fly. Windows XP is hogging it. To adjust for X-Plane 10, you must Boot with the " /3GB" Switch.
I can (but no longer do) fly X-Plane 10 on my vintage 2009 PC using Windows XP Pro 32bit Version. By using the " /3GB' Switch in the Boot.ini File - X-Plane 10 (X-Plane32bit.exe) will Fly !
Here is an example of my Boot.ini (will give you the option to Boot Normally, or Boot into Windows with " /3GB" Switch:
multi(0)disk(0)rdisk(0)partition(1)\WINDOWS="Microsoft Windows XP Professional" /fastdetect /NoExecute=OptOut
multi(0)disk(0)rdisk(0)partition(1)\WINDOWS="Microsoft Windows XP Professional with /3GB Switch" /fastdetect /NoExecute=OptOut /3GB
Applicable Articles to help understand your Problem:
Increasing Virtual Memory on Windows
Configuring X-Plane to Use Less Virtual Memory
3GB Switch in Windows boot.ini