Hello canfuzed, This is from the top of my head and may not be completely accurate. But here it goes:
As far as I know, Graffic card memory is RAM, and the BIOS allocates it as such, and re-searvs it for video use only, remember, somehow pictures have to make it from the CPU to the video. Thus meaning that if you have 2GB of RAM and your 512MB video card, your system really sees 2.5GB of RAM. So, when you install another 2GB, your system sees 4.5GB, since it only supports 4GB, it judges a memory error.
Normally from what I've read, computers just relocate the RAM, and ignore XXXXMB of top memory, but this could be a bug in your system.
=============================== EDIT =========================
I just went digging through some intel docs ( This one to be exact.
And it states that the last thing the BIOS allocates is system memory. It should do something like this:
The BIOS itself (1MB)
Local APIC (4kb)
PCI-E (512MB) (here is your video card)
Now, the local APIC, chipset, and IOAPIC could possibly use your system RAM. But, the video card has it's own memory, 512MB, this is allocated in the memory map for the OS and CPU to access. Now the BIOS, SHOULD
just chop 512MB from your system RAM... But... my best guess is that it, as I said before, has a bug...