theoretically you could eliminate it (unless you run multiple virtual machines for example) - as in normal use, XP won't ever need 2GB of RAM. However, for some reason best known to MS, XP seems to need to use pagefile when there's lots of RAM left free (you can check in task manager to see how much its using) - and it also seems to need a lot of pagefile (eg, I've had it set to 200MB with 1GB RAM, 5-600MB RAM in use, still get that message about being low on virtual memory, and windows is increasing it). Hmmm, this is turning into a bit of a rant!
I have run with no pagefile, 1GB RAM for a while, with no obvious problems, but now run with something like the recommended amount (daft as that is to me!), so that I don't get complaining messages!