System resources low

I have a gateway computer with an intel pentium III processor running at 500 MHz with 100MHz Bus Clock. It had 256 MB (two 128 sticks) Ram and I was experiencing some problems with some things freezing uo so I installed two more 128 MB sticks and the computer acknowledged them and I now have 512 MB of Ram. The problem is, I'm still experencing these problems and i'll get an error message that reads: There is not enough free memory to run this program. Quit one or more programs and then try again. Now i've not added anything since I added the extra memory. Also, when I check system properties - performance tab it may say system resources 13% free.
I have checked when the system performance reads 34% free, with Optimize Memory 3.5 that I have installed and it will say 59% Ram free.
At the same time, my browser diagonostics and Everest will both say either 58 or 59% Ram free. So, what's going on here? When it siezes up, it won't respond to anything and I have to manualy shut it down and reboot. I'm running Windows 98 2nd edition. Please HELP.

 

How big is you hardrive and how much free space do you have

 

my harddrive is 40 GB with 31.28 GB free space