Heck, a new $500 computer can get you a 2GHz+ dual core processor, up to 4GB of RAM, a 500GB or larger HDD, and Vista Home Premium. You could also get discrete Nvidia or ATI graphics.
At the very least, I'd also suggest a RAM upgrade (to at least 2GB) plus a bigger HDD (1TB is my sweet spot), add AE and keep Vegas 7.









