In the past, the assumption could generally be made that "extra" VRAM on mid-range cards was simply a marketing ploy to garner fatter margins since as said the mark-up was much higher than the additional cost of the parts. Heck, that even applies to "high-end" cards going back to the original Voodoo 2 12MB which was obsolete by the time the "extra" 4MB RAM was useful.
However, a card like this should have 'nuff performance to play games like BF2, GRAW, Doom3, &c. at 1280x960 medium to high settings including AA and AF. Therefore, the "extra" VRAM would enable higher resolution textures while avoiding or even taxing slower system RAM.
That said, it is academic as long as it suffers poor bang for the rupee due to overpricing. This could change as more X1600 (and perchance X1650) Pro and XT, and 7600 GT offerings for AGP become available -even if such cards equipped with 512MB remain sparse, more competition for the maintstream 256MB models should restrict obscene mark-ups on the former.