Hi Bebop.
The 4MB pre-installed memory size refers to onboard "WAV ROM" (audio sample wav file) memory. By purchasing & installing DIMM chips, you can expand this up to 1024MB. I purchased 2 each Kingston 512 DIMMS (model #KVR133X72C3/512). Interestingly enough, after you istall external DIMMS, the pre-installed 4MB memory can no longer be accessed (see Tyros2 User Manual: page 103 - WAV RAM).
The 3.2MB of internal flash Memory is entirely different. This refers to the Tyros internal Flash memory dedicated to storing Yamaha: styles, regs, & songs (midi files).
Bebop: Hope this helped clear up the confusion, and gets you back to having fun
playing your Tyros2. I had to admit It was hard to tear myself away from playing mine to answer this thread, but your question was a very good one of which warranted attention.
Scott