I have had many compaqs before, mostly as mess around computers. The only way to disable the onboard video is through the bios, which compaq doesnt allow you to do, or via an onboard jumper. Compaq did have these in the early days and they have them on some of the agp compatable motherboards. My guess is that the integrated "graphics" card is less then 32mb. So you will most likely not beable to recover that lost memory. You can try messing with the memory assignments.
If you are having problems with the install of the new Radeon 7000 pci, i am guessing, you probally have to install the drivers before you install the card physically into the system. It shouldnt matter that the onboard graphics are not disabled. Try reinstalling the ATI software with the card out of the computer. That may take care of your problems