Sql 2005 will not immediatly allocate all the memory, It will just grab what is configured as it's min and grow from there. But once it's grown it wont release it unless called for by the os. Are you also using the "lock pages in memory" option? Definatly leave at least 2gb for the os outside of Sql though.

http://blogs.technet.com/askperf/archive/2008/03/25/lock-pages-in-memory-do-you-really-need-it.aspx