Lag/Freezing issues!!

Hi Guys!
I recently built a home theatre PC that runs Windows 7... I've had major issues with what I call lag and mini freezes. At first it was most noticeable while playing movies on VLC or Media Classic. VLC would be jerky, sometimes would stop for a few seconds and it would always show "buffering" in the status bar. But then I realized it was my entire system, including when using firefox, any browser and windows in general (often 30 second freezes, or hitting the start menu taking 20 seconds to work). Cntrl+alt+delete would take minutes to activate and when I finally get to restart (either by task manager or startmenu) it can take up to 10 minutes for my computer to shutdown.

Being a fairly new computer, I was hoping for some ideas what this could be. I ran memtest on my 2x1GB, and there was an error on one of the sticks. I've swapped the one out and replaced it with another. I've added an extra 500MB stick cause I thought maybe my memory was lacking.

I've tried reformatting, I've run memtest again (no errors). Below are my computer specs:

Windows 7 Ultimate 32-bit
AMD Athlon II X2 240 Processor 2.80 GHz
2.50GB RAM (2.25 GB usable) --> guess some of it is diverted to graphics
1GB PC2-6400, 1GB PC2-5300, 512MB PC2-5300
ATI Radeon HD 3200 (still integrated)
M3A78-EM Motherboard
Power supply: Orion HP585D (585W)

Thanks for any help provided!

the 32bit will not see much above 3.25G, it's a limitation of the OS, for the other problem try this

Control Panel
Open System
In the left pane, click Advanced system settings. If you are prompted for an administrator password or confirmation, type the password or provide confirmation.
On the Advanced tab, under Performance, click Settings.
Click the Advanced tab, and then, under Virtual memory, click Change.
Clear the Automatically manage paging file size for all drives check box.
Under Drive [Volume Label], click the drive that contains the paging file you want to change. "C" for me
Click Custom size, type a new size in megabytes in the Initial size (MB) or Maximum size (MB) box, click Set, and then click OK.
the Page file size was 2046, ( Windows sets up a paging file that is equal in size to the amount of RAM the computer has installed plus 300 megabytes, but Microsoft recommends that you set virtual to be no less than 1.5 times and no more than 3 times the amount of RAM on your computer) but the recommended was 3069, that was strange, the system had allocated less page file space than it recommended, so I clicked on Custom size changed the Minimum size to 3072 and the Max size to 6144, clicked the Set button to the right and OK at the bottom

increasing the page file swap size make is easier to move data around in Windows, although movies usually don't benifit from this much, but you never know, the intergrated graphics are not the best of course, but you need help from someone that knows ATI onboard graphics, not my field of expertice
but what display resolution are you running at, could be that reducing the res a little will get rid of the stutter

make sure all the TSR's are closed, turn off every thing, and see if it makes a difference
after that, if it doesn't then
Step 1: Start the System Configuration Utility
Click Start , type msconfig in the Start Search box, and then press ENTER.
Step 2: Configure Selective Startup options
1. In the System Configuration Utility dialog box, click Selective Startup on the General tab.
2.Click to clear the Load Startup Items check box.
Note The Use Original Boot.ini check box is unavailable.
3.Click the Services tab.
4.Click to select the Hide All Microsoft Services check box.
5.Click Disable All, and then click OK.
6.When you are prompted, click Restart. see what happens, if it makes a difference, let me know and I'll give you the rest of the troubleshooting , if there is no real change, download memtest86 and run it

try removing the 1G of 6400, then the 1.5G of 5300, see if there's a change, you have to have a issue of some kind if you got 2.5G of RAM but Win only sees 2.25 of it, the 32bit OS should see it all

RAM suggestion didn't work
New PSU didn't work

what now?