Put the 256mb RAM back in and see if it recognizes 1.25 GB when it boots...if it does, something's wrong with your new RAM
The ram you bought for the internal slot could be high density ram, but it'd still show up as only half as big. Make sure you properly seated it and if possible, try booting with only the internal ram installed.
The thermal paste goes on two metal points near the CPU's heatsink. The CPU's heatsink has two heat pipes coming out of it. You may have to scrape off the OEM black gunk first. If this paste isn't reapplied, the machine will overheat quickly.
Yep - High Density. Damn. Luckily it was only $6 but now i had to re-order and wait
Should I re-apply the pate now (I'll be using it a bit until the new RAM arrives).