Same issue here on my GTX 470. It's more likely the drivers.
I'm using 301.42, I've noticed this memory drop in GTA 4 in the last few drivers aswell.
System information in NCP also reports 1279MB. I have also noticed a quite a big performance drop in GTA 4 aswell.
It seems that whenever the memory usage goes into the red it runs a bit poo even if there is enough memory, since evga precision reports only 1100mb being used.
BF3, Stalker COP with complete mod and The witcher 2 still use up to 1264MB.
So it's not really much of a big deal. Report it on Nvidia forums under Beta Driver Feedback. I'll go do the same.