You might check the version of media player that you have. There is a good chance that it cannot read files of a ceratin size, and punts from there.
Yeah, your computer is a big part of the problem. Google "video editing software" and you might find a few that will be compatible with your proc speed. I think the jerkiness you are seeing is that application assuming that the video/audio frames are coming in at a specific rate that your processor cannot produce.
In the mean time, you may consider getting an updated machine. You might even consider a used laptop. I saw one in a computer store recently that was a 1G machine with decent memory, and it was maybe $299 or so. I know it really depends on your own budget constraints and that's okay. But I guarantee it will make you really happy!
