Well, GDI did always use the graphics card, it was just that the GDI acceleration wasn't great - or anywhere near as flexible and useful as DirectX-type acceleration.
I am surprised that it makes much difference though - did you have a similar comparison for XP? I'd be interested to see whether XP definitely did run faster with a minimum graphics ram setup.
Totally guessing, but I'd guess that GDI uses graphics memory to load images into, so basic still uses the graphics memory and when you minimise the amount of graphics memory it's having to switch the bitmaps around in the memory a lot more.
Like I said though, that's pretty much guesswork - any gurus know?