Hd video editing and rendering on sony Vegas 11
The OS im using on it is windows 7 ultimate (32 bit).
You're kidding, right?
A 32 bit version of Windows will only use around 3.25GB of memory, no matter how much is installed, and some programs may use less than 2GB of it.
You need to upgrade to a 64 Bit Operating System for starters (for example, 64 Bit Windows 7. Home Premium will use the full 16GB you have installed now) . If you want the ability to use more, install Pro or Ultimate instead (making sure to go with 64 bit versions).
Or, upgrade to 64 bit Windows 8 (as even the basic version of it can use up to 32GB). But, avoid a 32 bit OS (as they're going to be limited to a bit over 3GB, period -- no matter what version you install if it's 32 bit).
IOW, the biggest problem I see with your specs is the use of a 32 Bit Operating System (as only around 3.25GB of your memory is going to be usable with a 32 bit OS like 32 Bit Win 7 Ultimate).
You need a 64 Bit OS to take advantage of the 16GB of memory you have installed now