Only shows I'm using 2.8GB RAM when I have 4GB Installed

Please do this:
1. Open a terminal by hitting CTRL + ALT + T
2. Insert and run this commands:
lsb_release -a
uname -a
free -m

3. Copy and paste here all the output of the terminal.

No LSB modules are available.
Distributor ID: Ubuntu
Description: Ubuntu 11.10
Release: 11.10
Codename: oneiric

Linux ubuntu 3.0.0-12-generic #20-Ubuntu SMP Fri Oct 7 14:50:42 UTC 2011 i686 i686 i386 GNU/Linux

            total used free shared buffers cached
Mem: 2865 2748 116 0 669 1487
-/+ buffers/cache: 591 2274
Swap: 255 0 255

No LSB modules are available.
Distributor ID: Ubuntu
Description: Ubuntu 11.10
Release: 11.10
Codename: oneiric

Linux ubuntu 3.0.0-12-generic #20-Ubuntu SMP Fri Oct 7 14:50:42 UTC 2011 i686 i686 i386 GNU/Linux

                     total used free shared buffers cached
Mem: 2865 2748 116 0 669 1487
-/+ buffers/cache: 591 2274
Swap: 255 0 255

No LSB modules are available.
Distributor ID: Ubuntu
Description: Ubuntu 11.10
Release: 11.10
Codename: oneiric

Linux ubuntu 3.0.0-12-generic #20-Ubuntu SMP Fri Oct 7 14:50:42 UTC 2011 i686 i686 i386 GNU/Linux

            total used free shared buffers cached
Mem: 2865 2748 116 0 669 1487
-/+ buffers/cache: 591 2274
Swap: 255 0 255

Have you noticed how much RAM your BOIS is picking up? Could be that your BIOS is not picking up one of your ram modules. If this is the case, then Ubuntu wont have a chance to know about it.

Can you run:
sudo lshw -html > /tmp/hw.html; firefox /tmp/hw.html

What does it say in the memory section? Does it match your hardware setup?

id:
memory
description: System Memory
physical id:
c
slot: System board or motherboard
size: 4GiB

Yeah, thats right. But it still shows 2.8 GiB in system settings.

Yes, you either need to run 64 bit or install the -pae kernel. sudo apt-get install lingux-generic-pae.

I reinstalled Ubuntu to x64, and now it says 3.7 GiB, so I suppose thats close enough :)