I'd say first, try turning off your anti-virus. Second, buy more physical memory. Looking at it again, it seems that windows recommends 150% of your physical memory as your virtual memory size, whereas I've always set it at 200% fixed in a contiguous block on my HD (with a variable size page file, as your HD fills up, your page file becomes more fragmented and this reduces performance).
WetWired, do you play this laggy? That is about how I play.. some of the comments also was wondering, if I got another Gig of RAM would wit be alot smoother?
In general, my experience is lag free (though I do have a problem where pathing NPCs show up where they'll end up before they get there, I don't think that's actually lag). I do have loading freezeups, however. The guy in the video had lag as well as a system problem. I am no expert in diagnosing the source of slowdown. I'd say if your HD light is blinking contantly while you're playing, you could benefit from more RAM. Otherwise, your issue is elsewhere.
My issue is clearly with viewing areas that are not precached, mostly when I quickly change camera direction.
I'll watch for my HD light next time I start up. If I am roaming on a path camera straight and just running it's smooth as butter, otherwise it gets pretty choppy like the guy above.