Thank God I fixed it at last by replacing the RAM stick to the DIMM socket. I think the BIOS had a problem updating itself and that fixed it. I'm not sure.
Windows goofs like that sometimes. I've seen many compaqs where, when you added the onboard memory (not for video, just onboard) and RAM modules, it was no where near the real value.
It only says 256mb because sticks of RAM have electronic signatures to them telling the computer, the size,speed, and date of manufacturer, and who made it.
yeah, uzi9mm is certainly right, CPU-Z uses the SPD to detect certain characteristics like he specified, most likely the motherboard wasn't capable of identifying the high density ram properly, which in older motherboards, can be a problem.
So don't go believe that stick of ram is bad, you should be able to put it in another system no problem.