Stephen,
Your logic is correct.
As a more general statement, the parameters passed to the file <eclipse.ini> (and in CCS we use the <ccstudio.ini> instead) control the relationship between the maximum memory used for permanent and dynamically allocated objects. The permanent objects are part of the 132MB of your example above (the JVM, for example, is also enclosed in this memory). The dynamically allocated objects are part of the heap.
A few references that talk about these relationships can be found below:
http://wiki.eclipse.org/Eclipse.ini
One note, though: the maximum memory that a 32-bit JVM can use is 2GB (that is the one CCS uses). This and other few tips that are popular around the web can be found in some blogs around the internet:
http://javahowto.blogspot.com/2006/06/6-common-errors-in-setting-java-heap.html
Regards,
Rafael