Think you're right about the fragmentation. It wouldnt make that much of an impact. Perhaps to some extent if you got the unfortunate combination of pagingfile on a full disk which is also badly fragmented, but not to the extent you talk about, i think. Was mainly airing some ideas trying to make you look past the GFX card.

Getting a new one might solve the problem, but personally i think thats not the main issue. The system i run on atm is not very far from yours:

Athlon xp2500+ / Radeon 9600pro / 1gig "budget" RAM

As a noob i make mostly cartoonish characters at about 3-7k polys atm, and have no slowdown issues whatsoever. Any chance you got someone who could lend you a vidcard for a test-run?

Not saying you shouldnt get a new vidcard, just trying to help you figure if thats really the problem. Hopefully you'll get it sorted so you can get your project done

Can it possibly be a driver issue? Guess you've tried several already tho.