Is that ATI card compatible with that Asus M2NE Mobo?
Yes, if it is PCI Express x16.
Having 256MB video memory is not unreasonable, especially looking ahead to future OS's.
Avoid cards with 64-bit memory! But you do not require 256-bit...
An inexpensive 128-bit vidcard like GeForce 6600 would be good.
Or even a Radeon X1600 (inexpensive, but good investment - Vista is coming, right?)
But the 7300 is awful low, bro...