I have an AMD Athlon X2 4400+, 2g DDR ram, 6800 GT pci express video on a DFI SLi-DR motherboard using the onboard sound with a seagate sata drive. The game is flawless at 1x TC. I can TC up to 32 even standing at the bridge and no problems. I only ever see video lag when I hit 2048 TC or when I'm at or above 512 and there's a large convoy near. I've run Prime95 on both cores in the background and the game at the same time and only seen a minor difference. Upon inspecting my cpu usage, I can tell that convoys use about 15-20% more CPU than an empty ocean, or empty as far as I know. I've also noted that both cores are being used when playing though I don't believe it's because the game is designed for it as much as windows is performing some load sharing. They both spike differently and show that the same process (sh3.exe) is the culprit of the top load. If anyone is interested, I can post screen shots.
Based upon my experience, RAM is used as you encounter more ai controlled entities, which makes sense really. The same goes for your CPU which becomes more loaded. Since I have an audio board that uses up some cpu, it's also losing performance there (though woot.com has a good deal on an audio card today). I hardly ever see any swap. I think having a top video card may be equally important for the game as much as having a good CPU behind it with ram being third. Ram will always improve performance, but never to the extent that a new cpu or video card will once you've reached 1g of ram. As low as the original poster's ram is, at 768(?) if I recall, it should be OK to play, and any video lag or low framerate would be more attributable to a poor cpu or video card than ram, though background processes would also affect this (those should be swapping causing a delay in disk and slowing performance).
To answer the previous question, what is swapping, check
http://whatis.techtarget.com/definit...213077,00.html