Geez, sorry to say I'd save up and just build another rig. Your spec is very low, the GPU, it's amount of VRAM, your RAM, and CPU are all very old and low spec. What's worse is you're running W7 32 bit on it, which takes a lot of RAM and may not work as well with older hardware and drivers as XP.
I played on a Pentium 4 3GHz w/ X1950Pro 512MB and 2GB of RAM as long as I could, and I gave up about the time the GTA IV Lost & Damned and Ballad of Gay Tony expansions came out, which played like a slide show despite GTA IV actually being playable on it.
Yeah, I know a Pentium D is a dual core, but it ain't no Core 2 Duo, and an X1600 series GPU is woefully old. You also say you're playing games that take upwards 1GB VRAM on a card that has half that much. Stop living in denial and save up for a better PC, you'll be glad you did.
At the very least, for now, run the OS in best performance mode for each game. You can just right click the game's exe and set it to run without visual or desktop composition via properties. There may be background progs you can shut down too, and some services you can disable, but personally, I would not invest another dime in that rig.
Also, you need to use older drivers for older AMD (ATI in your case) GPUs. Even those on the 5000 series recommend 11.11 I think. Yours may need older ones than that, and install via a clean uninstall of the old ones first.
Last edited by Frag Maniac; Jan 25, 2013 at 11:31 PM.