I was reading the release notes (ya, i'm bored) for the newest Nvidia drivers and found the following:
GeForce 8800 GTS 320MB: The driver reports incorrect video memory (256 MB) in
the Windows Vista Display Properties panel. 
However, the NVIDIA Control Panel properly reports the dedicated video memory as 320
This still doesn't answer my question if the full memory is being utilized or not?
The older GTS cards had problems with XP as well with memory dumping, and loss of performance especially with older games and even some newer ones because of the odd memory size. I believe that the new cards since nv has gone back to the traditional memory size has been fixed but the more knowledgeable techies here could answer that better than me.