I've been playing COD2 @ 1024x768, high settings on everything, AAx4, using Directx7 instead of 9, not sure on the fps, but no lag, everything is fluid, no problems. I got a 3DMark05 of 2954 with my crappy 9800. See sig for my setup. It sounds like your setup is close to mine. What sort of stuff do you have running that could be hogging up memory? Maybe check that. I'll check my fps to see what I'm getting.
[size=1]Antec Case w/Antec TruePower 2.0 430w
DFI LanParty Pro875 rev. A
P4 3.0@ 3.31 w/Zalman CNPS9500LED w/AS5
Corsair XMS3200 1gb (2x512) @ 245 2.5,3,3,6
WD 150GB SATA
SoundBlaster Auidgy 4 w/ Logitech x530
EVGA Geforce 7600GS 438/435