The CPU will have no problem - it's the operating system (and before that the BIOS) which deals with RAM.
Provided your motherboard will support that amount - and it will,as it's a new one. And the operating system will do the same - which it will, because it will be Windows XP - you'll have no problems.
Make sure that you get the right type of RAM for your motherboard.
In view of the fact that you're (in your own words) not fully aware how all this works, it might help to give a brief explanation of what RAM does.
Random Access Memory (RAM) could be termed temporary memory, in that everything it holds is lost when the computer is powered down.
When you launch a program, the operating system takes it from the hard drive and loads it into RAM - or at least those parts of the program that it needs at the time. As you work, Windows manages the RAM, switching program elements back and forth between RAM and hard drive. It does this because programs run faster from RAM than they would if they ran straight from the hard drive.
As you work, your file is held in RAM, and unless you save it to your hard drive, or to removeable media, it will be lost when you close the program that generated it, or when you shut the computer down.
That's an over-simplified explanation, but I hope it helps a little.