You're both arguing the same point. Yes RAM is intermediary storage, but of course it stores the models you see on the screen. Say you're playing the game and you do a 360 rotation and see skies, mountains, buildings, players, enemies, all these things on your screen with no loading screen. Where do you think this stuff is as you're looking at it? It's in the RAM, your processor is taking the data from there and changing it in a way your TV can see it, and it is all done quickly enough to turn around because it's on the RAM. The intricate player models are very expensive in terms of resources, notably their armors. If your ram is full, with all of the stuff you're seeing in the world already, and all of a suddenly someone new walks into your view who wasn't there before, then old stuff must leave the RAM, and this new model must be loaded from the hard drive, which takes a lot of time. If that model was already partially in your RAM from another player, then no work needs to be done. Bungie must be very careful with their texture resolutions and such, and they are obviously all lowered on the old generation. Still, you'd be very surprised how much space terrain takes compared to player armor, especially in this game.

TLW: it's irrefutable that last gen is holding back current gen. 7 years is an age in computer time, and many other components are more responsible for the difference (notably processor), but having enough RAM is very important for gaming on any type of system. 512MB just isn't enough anymore.