The Blue and White G3's memory controller only supports memory of a limited density.
It will only read the first half of the higher density chips.
I believe it works roughly like this:
512MB card (Only sees 256MB)
[32] [32] [32] [32] [32] [32] [32] [32] front
[32] [32] [32] [32] [32] [32] [32] [32] back
high density 256MB card (Only sees 128MB)
[32] [32] [32] [32] [32] [32] [32] [32] front
[ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] back
low density 256MB card (Works)
[16] [16] [16] [16] [16] [16] [16] [16] front
[16] [16] [16] [16] [16] [16] [16] [16] back
high density 128MB card (Works)
[16] [16] [16] [16] [16] [16] [16] [16] front
[ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] back
low density 128MB card (Works)
[8] [8] [8] [8] [8] [8] [8] [8] front
[8] [8] [8] [8] [8] [8] [8] [8] back
Macsales.com and DealRAM.com would be good places to look for compatible modules.