The manual download is on the right of the link that you provided.
The manual states that upto 512 mg unbuffered DDR memory is supported of DDR333 in each slot.
So, the answer to your question is possibly in the faq
here.
Possibly because you have a 1 gig memory module, the system is incorrectly reporting the true memory when each chip is in place?
Interestingly, the system specs. state that it accepts up to 2 gig of memory, so this is inconsistent.
I assume when you state that it incorrectly reports the amount of memory, you mean at boot time? If so, what does Windows XP report in the system summary screen?