Yes, the capture files are the media files that you capture from your camcorder/capture device/etc.
Virtual memory is set by the OS.
However, after seeing what you've created, I think that you are going to need to experiment a little more. Usually, folks add a 2nd drive that is as large as, or bigger than, the original "primary" drive. Since your 2nd drive is so much smaller it might not be the "best place" for all of your media files, depending upon how many files you capture etc.
That being said, If you set your target render folder and your Studio auxiliary files directory over to that drive, you may get perceptibly better performance out of Studio.
Anyone else have any other ideas?