Microsoft wanted to make 1024MB the recommended amount of memory for Windows Vista but some first-tier PC makers pushed Microsoft a bit to decrease it to 512MB.
Some PC vendors like Dell will ship "Windows Vista Ready" PC systems with as low as 512MB but it's not sure that the new operating system will run smooth on these kind of configs. A bit more RAM is always better.
The upgrade market will bloom but not initially. It will take people some time to go out and spend their hard-earned money. The first important upgrade is the CPU and a lot of people will go from single to dual core and then from 256 or 512 to 1024 MBs of memory.
People are finally getting ready to spend and the guys who are selling the parts, vendors distributors and retailer/etailers are rubbing themselves in anticipation.