I can't see why it wouldn't be ok to retain your home partition OE, but I can't speak from experience because as I was moving to a new PC I just ssh-ed in and copied my data. It was also an opportunity to lose a lot of rubbish I had built up.

You 3.4Gb ram is slightly puzzling as this is around the max you can get with 32-bit addressing. You may find that the installed system sees the whole 4Gb or you may find your motherboard robs you of the extra for various purposes.