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I am interested in your opinion on what setup would be more effective for smoother gaming FPS and Minimum Frame rates:

A rig with 4 gigs of Ram and a Graphics card with 2 gigs of VRAM (Ex HD6950 2g)
or
The same Rig with 8 gigs of Ram and a 1 gig graphics card with roughly the same pixel pushing horsepower for ex an HD6950 1 gig

I want to explore the effect of having more dedicated video ram with less system ram. I am maxed out with 4 1 gig sticks in My Rig and want to see if it's smarter to simply add a graphics card with 2 gigs of Vram or not?

Any links to benchmarks/reviews would also be appreciated.

I game on a 1080P 42 in LCD TV and want to achieve max settings on all of the latest games.

I'm 90% sure VRAM would have a more significant impact. System ram is rarely the bottleneck while running a game, but not having enough vram can drop FPS pretty dramatically.

Unless you have a fair amount running in the background at the same time you're playing the game then system RAM shouldn't be a big factor, few games are even going to touch 2GB of system memory leaving 2GB left over. And if need be much of the memory used by those background tasks can be shuffled off to allocate more for the game... which will be a hassle when you want to go back to those applications but that's another matter.

I'm pretty dubious even 3GB of system memory wouldn't be perfectly adequate for gaming.

Insufficient VRAM can really hit performance hard though, the vast majority of games should be able to run maxed out at 1920x1080 with 1GB though (assuming sufficient GPU power of course) so you probably don't need to worry about a 1GB card.
Still, there are some games that would appreciate the extra memory. I know Total War: Shogun 2 loves VRAM, it'll happily use a decent amount more then 1GB.

At 1080p you don't need more than 1GB of VRAM yet.
You also don't need more than 3-4GB of system RAM either.

Neither upgrade will make any difference to you at the moment, but if you upgrade to a 4MP display that 1GB is going to choke, whilst a machine with 8GB will only be faster than a machine with 4GB if you heavily mutlitask, which is unlikely when you're gaming.

I think, vram will be more effective.

I would agree with everyone else, 1GB vram becomes a bottleneck before 4GB ram does.