Does this make any difference (GTA4)

More RAM can might help to a point, but the CPU really needs to upgraded. You really need a 3 or 4-core . However, have you applied the latest patch? The latest patch even helped me and I have a quad-core machine running with an ATI HD 5750. I was getting around 30 fps. When I applied the latest patch, I was able to tweak the settings even more than before to get a really nice looking view and I average around 45-50 fps constantly.

But, you really need to at least upgrade your CPU and having 2 to 4 gigs of memory wouldn't be bad either.

The GPU probably needs to be upgraded as well.

If you really want to know, go to this site -> http://www.yougamers.com/

It is from Futuremark (makers of the 3dMark benchmarking programs). It will test your system based on the game you chose and it will tell you where your system falls in line both for the CPU and the GPU.

Even I get horrible lags .

I have a better CPU(Core 2 Duo E7300) even it is not sufficient.This game really requires a quad core CPU.

Your RAM is too low!!

this game even lags in core2duo? damn shouldn't have bought this in the first place.