First, adding more ram would not normally slow down your system, as long as it matches the type the mobo uses. There is no CPU element, or anything else, that would cause this.. The only time that would ever happen is if you got bad ram. It happens. Just go back to the store ask for a replacement.
Next, RAM upgrades gives you the largest over-all performance upgrade of any other part. The RAM can either make or break a system.
When it comes to games, the major performance increase really depends on how it was made. For example, the upgrades from 512MB to 1GB is really not noticeable, but going from 1GB to 2GB of RAM GREATLY increases the performance.
When it comes to the processor, if you got 2GHz or up, it will be able to run any game you throw at it.
The video card changes the visual performance the most of anything, and is most often the bottle neck on systems.
But as for what you're saying, it sounds like you got bad RAM. Go back to the store and return it. Also try with only one stick, and then the other, to see which stick is the bad one.
The only other thing that I can think of is that your mobo is very picky about the RAM speed, so if it doesn't seem like the RAM is bad, make sure it matches EXACTLY what your mobo recommends.
