fuck AVG off and get Avast if your wanting free AV

Use RegVAC to tidy up your registry and rid it of the old threads

Use start > run > msconfig to remove anything un-necessary that runs on startup

Run spybot adware scan and also if you enable advanced mode you can use the spybot registry checker, run that too

Check your virtual memory is set to at least 1536MB (physical memory x 1.5)

Remove any indexing software shite like google desktop or windows desktop search, complete and utter waste of time and thrashes the balls of your hard disks

Have you got any firewall software running? If so which one, and is there any point in having it (i.e. if you have a nat router) by the sounds of it you are pretty pc savvy and wont be installing any old shite you can get your hands on without realising its spyware (hence the need for an outbound firewall)

CLear temp files, temp internet files (start > run > %TEMP% > hit enter

Update graphics drivers - ive found that certain onboard chipset drivers i.e. intel, are so badly written they make your system performance turn to shit

See how you get on with these, and as mentioned, see whats using up all your resources in task manager

1GB on XP is plenty - I'm currently using a dell latitude X1 mini laptop with an early centrino chip thats only got 256mb, and it runs fine. Though it is only a bare bones install. XP SP2, office 2003, firefox and Anti Virus is all i have installed. I only use it for web browsing downstairs anyway rather than using the PC...plus i can watch telly at the same time