Your friend is incorrect. The software as far as I know follows the limit of the x86 processors and the board limits. In theory, this is between 2GB and 4GB. I believe the limit for XP is 4GB, but maybe someone else that has actually used more than 2GB can post here as well. I've never used more than 1.5GB. This goes for Home and Pro.
As for the other differences (Yes they are different) :Click here: