Check the actual breakdown of the memory, i.e. Dedicated Video Memory, System Video Memory and Shared System Memory.
That will give you a better understanding of where your memory went. the old 64MB you used to see on XP was probably just the extra memory committed to your card from the system RAM. 8MB might be the actual onboard RAM of your video card.
1GB overall RAM for your PC is hardly enough to pass around on a Win 7 PC, I'd up that to 2GB or 3GB. Your video will likely get a higher allocation after an upagrade.
Just curious though, is this reduction in video RAM noticeably affecting the performance?