That’s a very good question Steve. 
You were understanding right about being not able to use all of that 8 gb of ram. I was researching this very same topic and jotted down some notes on the subject. I’ve learned that Windows 7 x86 (32bit) only addresses 4 gb of ram. Windows 7 (64 bit) allows much more ram, the maximum, I still don’t know, 6 or 8 gb or above? How much ram can Cubase address with Windows XP? 4 gb? 
So one bottle neck in addressing more ram is the Windows version that one has on their computer, regardless of how much physical ram one might have installed. For example…My Intel 17 2600 cpu machine is currently limited to a maximum installation of 16 gb of physical ram because I have Windows 7 Home Premium installed. If I went to Windows 7 Pro or Ultimate (as a lot of folks here do) I would be able to install a maximum of 32 gb of ram on my computer, per my dell computer setup guide. Addressing that much ram using Cubase and VSTI’s with the Windows limitations is another story that I have yet to learn about.