Heather - You should be able to work with HDV or some other flavor of compressed HD files, not very quickly, but it shouldn't be too much of a problem with that system. One thing I noticed is that your paging file is set really high for your RAM. Paging file size should be about 2.5 times the amount of RAM. It may not have that much effect, but it's worth bringing down a bit.
How many apps do you usually have running at one time? The more open apps, the more paging you'll be doing.
Are you running the footage on the system drive? Or a partition off of the system drive? Because that will really have an affect on performance. You'll want the footage to be on a separate drive, preferably a RAID and preferably not PATA drives.
You may also want to check on what services may be running. You can do this by going to Start, Run, type msconfig. There are two approaches you can take here. You can click on the box to Hide All Microsoft Services, then click Disable All - this will disable all service except Microsoft services. Or you can go through and find the services you don't need, such as Apple, iPod, Java, Office, and others that may be there and turn them off.
One other thing you may want to do is get CCleaner,
http://www.ccleaner.com, and run that to clean out all your temp garbage. It will also clean your registry somewhat, there are much better tools for that though.
Let us know if anything helps.
Good Luck! TC
