The 650M would run out of power before the VRAM limitation is hit.
A number of 7850s ship with 1 GB and game fine even at high resolutions. The VRAM is not limiting performance in this particular case. If the GPU was something like the GTX 675M then the 1 GB VRAM would limit the card.
The vram argument here is not really that the gpu will support the high settings (it will not) but if 1 GB is insufficient for the highest res textures (difference in fps between high and low textures is virtually 0 as long as you have sufficient bandwidth and vram). 1GB might require high or medium vs very high in some games.