You're not going to notice any significant different in performance by downgrading and you may in fact have poorer performance. I'm assuming you have at least 4GB of RAM in that system and therefore probably have 64-bit Win 7. If you downgraded to 32-bit XP, you'd lose access to any RAM above ~3.5GB. There is also a chance the software will not function on XP, since it was designed for Windows 7.
As for the "VRAM"... Windows will automatically assign excess system memory to video memory if it's required. If you go to detailed performance and system information you will see dedicated graphics memory (1024MB) and total available graphics memory (probably around 3072MB). The total available graphics memory is what is being reported by the other software... not the actual amount of RAM on the video card.