It seem confusing I know but this is a brief synopsis of reality
yes you can have a maximum of 1TB ram in a VM
the situation regarding 96GB of vRAM relates to licensing. any VM that has been configured with 96GB or greater will only utilse 96GB of vRAM for licensing purposes, this means that you do not have to purchase 1TB divided by 96GB of vSphere license.
that said since the release of 5.1 the requirement for vRAM has been removed.