Arma 2 FPS

Yes you need better CPU as Arma 2 is very, very demanding game and push pretty much every PC component. The CPU is your big bottleneck and I'd recpmmend at least 2500K (or non K) or FX 8150.

DDR2 is also not exactly a miracle as well but DDR3 can be found for some 40$ but that would require you to upgrade motherboard.

It might be a overheating issue. Download HWMonitor: http://www.cpuid.com/softwares/hwmonitor.html

Start the program and play Arma 2 again. If the lag kicks in, close the game and check your temperatures.

This program records your maximum temperature as well.

"at first Arma 2 runs just fine but then about after 5 minutes my FPS drops like a rock. Any suggestions? "

Sounds like overheating to me too, I use a program called coretemp to monitor my temps. You will probably find your cpu hits its max safe temp and then runs at half speed to prevent damage.

my lowest temp is about 47c and my max is 57c during play, is this an issue?

Those temps aren't bad at all.
You do know that the game is poorly coded, right? Which drivers are you currently using?