Hi =YLAP=
I have two of these with Athlon XP 2600+, Sempron 2500+.
Strong suit of Asrock K7S41GX is its stability and tolerance of almost any combination of memory modules.
As you say, one of your 256MB RAM modules is PC2100/266MHZ but because your CPU is 133x12, the BIOS will still probably default even an all DDR2700 or 3200 setup at 2100/266MHZ so as to remain synchronized with your CPU.
See if you can reduce the amount of system RAM allocated to your video from 64 to 32 in the BIOS. ("Onboard VGA share memory" - default is "AUTO") This will leave you 480MB rather than 448.
1/. Do you 'need' DVI output?
2/. Do you 'need' MUCH better graphics performance?
If the answer to either is 'yes', get a separate AGP graphics card with DVI outputs. I've not tried this myself so make sure to follow any recommendations from Asrock re suitable cards. Also its common with business-orientated integrated video chipsets, like the SIS741, to have a less-efficient external AGP bus than the integrated one. This means that the improvement you'd reasonably expect from installing a high-performance video card may be hindered by the limitations of the chipset architecture. Best if you can try a card before you buy.
An AGP card with 128MB or even 256MB 'on-board' will not require any of your existing system RAM, so you would ten have the full 512MB.
If 'no' get more RAM. I'd get a full 1GB as you only have two slots. (Board max is 2GB)
Have fun!
K7S41GX manual
http://www.asrock.com/manual/K7S41GX.pdf