Everything I've ever seen concerning this value is that it should be half of your system memory. However, many motherboards had some sort of problem with the 256 setting, and so the recomendation is generally if you have anything over 256 megs of memory, you should set it to 128 megs.
BTW, this setting is the amount of main memory that the system prealloacates for use with AGP texture storage. I do not know if this means 128 megs of memory is "locked" at system start time and kept from use with other programs, but I suspect that it is.
Ron