I can start a Mendix application with version 2.2 of the Mendix service console just fine with max memory set to 8 GiB (even though the server only has 1 GiB of memory).
If not enough memory is available during startup you should see an error like "Could not reserve enough space for object heap". Is there anything like this in your m2ee_log.txt
log file?
And is your application starting correctly with 1536 MiB of memory?
On a 32-bit operating system, no not really. For some in-depth reading, see http://stackoverflow.com/questions/171205/java-maximum-memory-on-windows-xp for example.