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You cannot change the memory settings in BIOS. All you need to do is go into the bios screen. confim that it has seen your new memory and "save and exit" If it is not showing your new memory try removing and reinstalling the memory confirming it is installed correctly. it should just see it.
Your not alone in this type of problem. When it comes to computer (laptop especially) they usually have a "Max allowed ram" most times its listed in the back of the manual in small print. Its a way to keep people buying new computers (if your into the conspiracy theories) Chances are even a bios upgrade would not fix your problem. Mostly BIOS upgrades add support for new boot options, plug and play support, and fixes to bugs in older versions.
You can check aspires/acers website for updates www.acer.com If they have an update it will comes with documentation as to what the update does.
OK! I have read about many people with this problem and I have had the same problem so maybe i can shed some light on it, here goes!...... I turns out that the intel chipset on this laptop will only handle 2gb of memory, not 4gb as Acer say in the manual. But, is this true i wonder! because I have tried 2 2gb sticks in my laptop and sure enough it wont work. However, I have now put in one 2gb module and one of the original 512mb modules and it works fine but vista said it only had 2gb and the bios sais 2.5gb! very strange but then I updated vista with service pack1 and now vista does see the full 2.5gb memory. So acer are still wrong which leads me to think that maybe this could be solved with bios updates in the near future (I am on bios 3.50)
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Make sure 11% that you flash the correct bios as the wrong one will render it useless. Also make sure that you are plugged into the mains when doing it and pray that there isnt a power cut during the flash :)