I have installed MegaChip's in both my A500 and A2000 with no issues. So we understand correctly, your system is showing 1MB of chip before installing it, but after installing it you're only showing 512K? Can you post a photo of the top of the board, with it installed? The lead should go to the Gary chip and you may want to check your jumpers. Can you confirm the MegaChip is working correctly in any other systems?
There are installation instructions here that might help:
http://amiga.resource.cx/exp/megachip
