Graphics ram and system ram serve very different purposes. System ram holds data for the CPU to work on, graphics ram holds textures and frames that the graphics card will work on and needs to work on, the CPU cannot access the graphics ram and the graphics card cannot access the system ram without going through the GPU/CPU respectively.
For any modern system, i would definitely suggest at least 4GB of system ram especially with prices so low right now, for the graphics card 512MB is enough for up to about 1680x1050, at 1920x1080 and above, 1GB or more of graphics memory starts to prove useful as the frames and textures are much larger and need more space to be stored, especially if you are using AA which is very graphics memory hungry.
That makes perfect sense. So I guess any intensive graphical mods (for say, crysis) would be handled solely by the GPU, so investing in a higher vram card would make more sense. Thanks, i was deciding between getting the 1GB 6950 or the 2GB one.