I believe the system is detecting both memory sticks. I have System Monitor running and under Memory and Swap History it tells me how much of 2GB I am using so I would guess it's detecting both sticks.
You can usually isolate a RAM problem to one stick by taking out one, running memtest, swapping the one RAM stick for the other and running memtest again.
Given that it is unlikely that both sticks have developed problems at the same time, it is likely that memtest will only show errors with one of the two sticks.
Then, you try booting with only the stick installed that shows no errors. Memtest should show zero errors if the RAM is good.
You should be able to run the machine on only one stick of RAM until you can organise a replacement (or an upgrade to more RAM...).
That seems like RAM is ok. But then something else must be. Not sure if hardware or some software.
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Looks like this bios error message was being associated with ASUS motherboards which is what I have. http://bugs.debian.org/cgi-bin/bugreport.cgi?bug=549429
I wanted to post 2 interesting links that I found while researching this memtest error. The error message seems attributable to larger rams. The first link proposes a patch and a modification to your bootloader. http://bitcube.co.uk/content/memtest-failures-0
The second is from a Debian bug report started in 2005 and progressing to the patch in 2009. I found it interesting but over my head; good lesson though. http://bugs.debian.org/cgi-bin/bugreport.cgi?bug=319837
Also, since your recommendation of physically removing the memory sticks and booting the computer with 1 of the 2 in place each time, I have had no freezes/lockups on initial boot! Seems like your suggestion has re-seated the sticks and cured what has ailed my system for months. Thank you for that.