Chances are your just running your computer low on memory and it's paging to and from the hard drive over and over. This is called thrashing. On top of that your doing very processor intensive stuff converting and the processor is being used to page things to and from the hard drive as well. Get more ram definitely.
If your using an integrated card this is also hurting your performance. Making your processor handle your graphics, dvd converting, downloading files and paging with only 514mb of ram, your gonna see a lack of performance.
if you get 2gb you wont have to worry about your computer accessing the page file. which means you'll never really see your computer lagging behind unless your processor is outdated
When you say hang, do you mean you have to reset? Or do you mean, it slows down to a crawl? If its doing the former, then yeah, RAM would help.
Certain blue screens can mean loss of memory as well though I guess.