Also of note is that fragmentation of physical RAM is completely irrelevant, aside from locality issues. They can map random physical pages into one nice, contiguous virtual space, and the only thing that matters is fragmentation in the virtual space. Since a each process gets its own entire 4GB virtual address space on a 32bit system, fragmentation nearly becomes a non-issue.

This is also why I suspect that they were mapping their virtual address space using block translation instead of a page table - if they had a page table, even in one process, it shouldn't have been a big issue since the virtual address space is many times larger than the available physical ram on the 360/PS3/Wii. The other possibility is that much of their RAM needs to be accessible by the GPU, for which fragmentation is an issue.