memory allocation install issues with parallels 5 and Windows 7 on Macbook Pro

I just installed Parallels 5 on my Macbook Pro (Mac OS X 10.5.8, 2GB 667 MHz). I was running Windows XP with it and when I tried to install Windows 7 (32 bit), it said I needed 512MB of RAM and I only have 256 MB of RAM. Is there any way to configure the virtual machine to be able to load this or do I just need more RAM? Also, how can you tell on your Mac how much RAM you have?