To cut a long story short.
Your Ati card has 128mb of dedicated memory on the card.
It uses a feature called hyper memory.
What it means is it can use some of the memory ram fitted to the motherboard as a place to store textures ect for games.
This is dependent on how much overall system memory you have, and in your case you have 1GB of ram.
By the time windows has loaded, depending on the version of os used you are left with very little free ram that the hyper memory feature of the card can use.
You need to check how much system ram the motherboard can run.
if you place more system ram in the system it will then let the hyper memory feature work.
Dedicated is what size of memory is fitted to the physical graphics card.
You should have an ATI X300 card in the system at 128mb dedicated.
The other 128mb is utilized from system memory, providing you have enough free system ram.
Adding more system ram would allow the hyper memory feature to work.
System vendors often miss quote, or negate to mention that in order to obtain 256mb that it requires a set amount of system ram also.
Often stating 256mb leading you to believe it is the actual dedicated memory of, or on board the graphics card it`s self.
The system dedicated memory is being used for the video built into the motherboard. I had one of those 8400s a long time ago and if I remember right you may not be able to disable the built in video. If you go into the bios it will let you adjust the amount dedicated. If it will let you disable the integrated, then disable it, if not then lower it to the least amount and you can try disabling it in the harware manager.