Less cryptic answer... there's nothing wrong. Microsoft doesn't count some memory that it uses. I guess that's to make you feel better about an OS that uses 40MB of ram just to boot into the "home" screen. Of the 40MB, 6-8MB is used by the page pool, so that's not really fair to count - although without such a massive page pool WinMo would be unusably slow. So, let's say it needs 32MB ram to boot.
Are you running WM6.1? It seems to perform reasonably well even with a fairly small amount of free ram.
Anyone else remember when WinCE ran on devices with 2mb ram? TOTAL? For both memory and programs?
http://en.wikipedia.org/wiki/Casio_C..._A-10_and_A-11
2MB ram... sky's the limit baby.
Heck, the E10 was HUGE with 4mb ram. I think I still have one of those somewhere...