Can I Upgrade the Video Card of a Dell Studio XPS 16?

Short answer: It doesn't "switch" and you can't disable the Intel IGP.

Long answer: From a hardware point of view the Intel IGP is always handling image output to the laptop's LCD screen. The NVIDIA GPU copies rendered graphics into the Intel IGP's frame buffer (which resides in system memory) when it is active. The Optimus software makes certain programs use the GPU based on the loaded profiles and user settings. It currently does not support running the OS desktop compositing on the GPU.

See the Optimus White Paper for more details.

Your laptop has Nvidia Optimus Technology (Dell help page):

NVIDIA Optimus technology (not available on 3D panel)

NVIDIA® Optimus™ technology automatically optimizes your battery life while maintaining the graphics performance you expect — completely, seamlessly and transparently — whether you’re watching a movie, surfing the Web or playing a game.

How does it work?

• This intelligent graphics technology switches between discrete and integrated graphics processors automatically whenever it determines what kind of application is being used. If you are simply surfing the Web, the GPU switches to the integrated version, therefore helping to extend your battery life. It's that easy to experience long battery life and amazing visuals without having to manually change settings.

• Watch an HD movie, surf the Web or play games knowing you can get the long battery life you need and the performance you expect from NVIDIA Optimus technology.

Basically your system is not using the Nvidia card because it doesn't need to. If you were to start watching a HD movie or playing a game then it would switch to using the Nvidia hardware, the fact of the matter is that you're not doing anything that needs the Nvidia card to kick in so your laptop is saving power by turning off the Nvidia card and using the integrated graphics instead.