EHEM. minimum system requirements for dead island( and those are usually understated):
Dead Island Minimum System Requirements
OS: Windows XP / Windows Vista / Windows 7
CPU: Intel Core2Duo 2.66 GHz
RAM: 1 GB Memory
GFX: Nvidia GeForce 8600GT or ATI 2600XT 512MB
DX: DirectX 9.0C
HDD: 2.0 GB free hard drive space
Other: mouse and keyboard
So on your system it'd probably still lag even at minimum setting, plus it being a crappy coded console port makes it even worse.
Time to upgrade!