I think your biggest problem is memory and possibly processor speed. I ran XP Pro, 32-bit, service pack3, until this last weekend. It ran ViewNX without any problems and Photoshop Elements 9 was sometimes a little slow. A lot slow, if I had other programs up and running, especially a browser. PSE has roughly the same minimum requirements as CS 3, according to Adobe's website. You're running just at the minimum memory requirement, and just over the processor requirement. My box is running 4gb memory and a 2.7ghz processor.
How tight is your budget? If you have a little hole-in-the-wall computer shop in the area, or something like this, you might be able to pick up memory sticks for anywhere from $3 to $10 each. I've done it. The main thing is you have to know what you're looking at. I got a couple of sticks of server memory from Reuseum that my local PC shop was, fortunately, willing to take off my hands (the particular type is a bit hard to find, and there's a market for it). You might also be able to replace just the CPU. If you go for something of a similar vintage but faster, it shouldn't be too much. This assumes you're comfortable doing some of your own tech support. The staff at the hole-in-the-wall place should be able to guide you in what to get and how to install it.
If none of that is viable, then the other thing is to free up as much memory as you can when you're processing photos. One program at a time. Unplug from the 'net and shut down the firewall and virus scanner. If you don't have CCleaner, download it (it's free). Take a look under Tools -> Startup. You'd be amazed how many programs figure you want some form of quick start or updater loaded at boot time. Disable anything like that (you can re-enable it after you're done) and reboot. That might give you a little more memory to work with. I don't know if CS uses a scratch disk; if it does, take a look at the size. Same with Windows' swap file. You might get a little more wiggle room by increasing those.
USB card readers are under $25. Might be worth picking one up. It should be faster.
If those don't help, well, maybe someone knows of other photo processing programs that are lighter on resources. Good luck.
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