the ATi Radeon 7500, based on
http://ati.amd.com/products/radeon7500/radeon7500/ only has 64mb of video memory
As to why the demo may work and the full version will... who knows?
the demo is just that a demo. Not all the features and graphic options may be in use. example, maybe the demo doesn't use the shaders where as the full version does.
Just supposing, dont' know for sure.