Well, 32 bit only recognises around 3.2 / 3.3 Gb of total RAM, so with your system RAM of 2GB and the Video card RAM of 1Gb, it still ends up below the total - so I don't think its that that is causing the issue. Always good to do regular defrags and try and keep the harddrives in order. Not entirely sure what the cause…
I'm not super duper knowledgeable on this stuff, but I do have some experience dealing with computers so hopefully some of this helps. I would say if you were going to reformat anyway, that might be your best bet for now, at least to rule out any software issues. If the problem persists after that, it's probably a hardware…