Since I'm seeing ALE, *RD, *WR active does this mean for the first 1K (internal external RAM address range) of data memory, it's accessing two separate locations with the same address? I'm just trying to totally understand how the chip works.
No, it is accessing external RAM.

Anyhow, when you have external RAM anyhow, why do you care whether the RAM accessed is internal or external? [this to understand you better]

Erik