It sounds like 32-bit addressing is turned off in the Memory control panel. Turn it on and restart your Mac. It's required for access to all of the ram in your system. 24-bit mode will show System using all of the inaccessible RAM, in addition to what System is actually using.

FTP for transfer is a good idea as System 7.5.5 can't talk AppleShare to machines running OSX higher than 10.4.x, IIRC.