IJ Reilly said:1. You don't need more RAM. This is not the problem.
It sounds exactly like a RAM problem to me. It has all the symptoms.
I run far older and slower Macs than a Core Solo mini with less RAM than you've got, and I don't see performance problems like you are describing.
Because you're running native software. Rosetta uses a massive amount of RAM to store all the translated code. 2GB would not be uncalled for when running stuff with Rosetta. (It doesn't help that the crappy integrated video steals much-needed system RAM either.)
I can't readily recommend any course of action beyond repairing permissions
That will accomplish nothing. I vote for a moratorium on anyone recommending "repairing permissions" as an answer to anything except actual permissions problems, which are quite rare these days.
--Eric