I recently upgraded my system to an Athlon XP 2000+ , 256 mb DDR RAM , 80 GB HDD , Asus A7N266-VM motherboard with a built in GEFORCE 2 MX display card.
root(hd0,8) error 28: selected item doesn't fit into memory.
I've exactly the same configuration with just extra ram I had same problem what you've mentioned.
Apparently it seems it is the problem with grub bootloader. I changed bootloader to 'lilo' and it worked fine.
Just for your info, (if you have not yet configured X on nvidia) you will need to download and configure drivers for nvidia. In case you have any trouble doing it, do mail me off-list.
Regards, Ranjeet Walunj