It's not the Indivision that's using all your chip RAM, but that hi-res screenmode. Workbench backdrops also eat chip RAM.
First thing to try is setting images to user other memory (in Workbench prefs), then go to a lower-resolution screenmode with fewer colors.
EDIT: FBlit supposedly helps too, but I've never used it so I can't report on it first-hand.
