Relax - all that you decsribe is perfectly normal with any editing package.
Trust me it could be worse - my first editng pc was a XP1700 with vegas 4.0 - I well remember my tiny preview window and endless renders.
If you check out the pc specs of regular posters you are likely to see many dual cores and a few quad core systems. Video editing takes power and almost any editor on any system will regualrly find themselves wanting more power. Everytime i upgrade I am all smiles for a month then I start planning the next upgrade.
I see you are editing on highly compressed footage. For techincal reasons editing anything like xvid / divx / wmv will be much slower than less compressed footage such as DV.
At the risk of repeating hints the following can help.
IMPORTANT - always set the properties of the project to the same as the media you are editing for max editing performance.
Motion blur - Use will make renders up to 10 times longer and make the timeline very unresponsive - turn off untill final renders if used.
Use 2 or more drives - Haveing the media on a seperate drive (not too full and regularly defragged) is helpfull.
Run a lean well maintained system - Just have the bare minimum of stuff running.
Hope that helps or at least puts your mind at rest.