1. Locate the Empire: Total War preferences file. Not sure about Vista, but on XP its default location is C:\Documents and Settings\YOURNAME\Application Data\The Creative Assembly\Empire\scripts
2. Open up the file and find the line:
gfx_video_memory 0; # gfx_video_memory <int>, Override available video memory (bytes) #
3. Change the value "0" to something bigger. I think it uses bits, but I'm not sure. I set this value to 536870912, which is 512 mb converted to bits. You can find a converter on the internet and set this to whatever value you like, not sure what will work, but that number worked for me.
I have a 256mb HD radeon 2600xt AGP and I can run the game on high/ultra settings with no problems and very playable fps, lowest it gets is around the 20's. I have honestly no idea why they decided to limit it in such a way but this method should provide a permanent workaround.