Yep sounds like driver issues, with that spec you should be getting framerates of 100+ at all times, if you are already using the latest drivers try going back a few versions and using an older set, brand new drivers (especially nvidia ones) often have undiagnosed bugs.
I still occasionally run sh3 on my old laptop which has a 1.1GHz celeron processor, 512Mb ram and a radeon 9200se, even that crummy spec gets a minimum of 30-50fps although loading times are >10mins.
(edited several times to correct spelling mistakes!)
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