TES IV Oblivion Lag near NPC Problem

Hey guys. I recently got a new comp and I know its not the best one ever, but im happy with it. I downloaded Oblivion from TPB (Wanted to see whats it like before wasting money) and I loved it. I can play it good, in dungeons i get some good FPS. But when im in open terrain i can feel the stuttering lag. but another problem is, when there is more than 1 NPC my FPS goes low. and i mean low. bugs me alot tbh. So before buying it, could anyone give me a hand ? My system is: 2GB Ram OS: Windows vista home premium Processor: AMD Sempron Dual Core processor 2300 (2 CPUs) @ 2.2GHz DirectX 10 nVidia Geforce 9100 128MB (?) So yeah. im assumin rest of my system is good but the graphics card. could anyone tell me if a better card (if i buy a new one ) would solve this ? or is there another way. im saying once again, in some places it runs really well, but in places where there is lot of people (like imperial City) it lags. same on terrain. he Runs like he's teleporting a step by step lol Thanks all

Yep, it's your graphics card.

I used to get OK response times from Oblivion on low-to-medium settings with an nVidia 8600 GT. Anything faster than that should run it fine.

You should be able to get something much better than an 8600GT for less than $100, but there's not point recommending anything as I don't know your budget.