Here is some detailed info on my computer, I just bought my dad the 520 GT graphics card to fix the lag but it's still there, he doesnt want to spend much money to upgrade but wants to watch youtube without any lag
Several months ago I built a low-cost home theater system using a Sempron 145 (2.8ghz) and an AMD HD6670 video card. Some choppy movie playback until I overclocked the Sempron to 3.3ghz. Don't know if this is possible with your cpu.
EDIT: You need to be sure your internet connection speed is not the cause of the choppiness.