Agreed that this sounds more like insufficient RAM. When Windows doesn't have enough RAM, it will start swapping unused memory pages to disk. That is, it takes the data in RAM for programs/services which hasn't been used in a while, and writes them to the hard drive in something called the pagefile. That frees up the RAM to be used by your game.
Since HDDs are basically useless for doing more than one thing at a time, during this page swapping process, any other HDD accesses are going to lag badly. If your game happens to need to load new textures (very common in GTA), it will lag because it can take several seconds to tens of seconds for the HDD to finish swapping and retrieve the textures.
Try leaving Task Manager running (right-click a blank section of the taskbar on the bottom, and click Task Manager from the popup menu). On the Performance tab, it'll create historical graphs of your memory and disk use. If you see memory approaching or at 100% and disk activity spiking right around the times you're experiencing lag, then it is indeed page swapping.
If that's the case, the best solution is to buy more RAM. However, it seems 4GB is listed as the max for this particular motherboard (the system is over 10 years old), so that's not an option. So try trimming down the amount of memory your system is using prior to starting the game. Close any open programs (including browsers). Kill any programs which stay resident (show up in the popup toolbar in the lower right - looks like an up arrow). And maybe go through Windows services and disable any that you don't need.
[Guide] Which Windows 7 Services are Safe to Disable? - We have posted service configuration guides for Windows XP and Windows Vista in past and now its turn of Windows 7. In this tutorial we'll learn about the
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If you have plans to upgrade in the next year or so, you should be able to mitigate the lag by buying a SSD and using it as your boot drive. Unlike a HDD, SSDs can easily handle multiple read/write requests simultaneously. So if the game requests data from the SSD while Windows is busy swapping, the game won't have to wait and you won't get any lag (or you'll get a lot less of it than with the HDD). However, the reason you should only get a SSD if you're upgrading soon is because pagefile writes can rapidly eat through a smaller SSD's write endurance lifespan. So it's not something you should subject it to permanently. You can reuse the SSD on the new system when you do upgrade.
If you're still having the problem and don't want to upgrade hardware, there's one last thing which might help (and I stress "might"). The pagefile is a system file, so defragmenting can't move it. If it happened to be written or enlarged when the disk was badly fragmented, then the pagefile may be fragmented, causing swapping operations to go a lot slower than necessary. Go into the pagefile settings and disable it. Reboot. Now defragment the drive. When the defragment is complete, create a new custom pagefile whose min and max size is about 1.5x your RAM (so 6 GB in your case). That should make a pagefile which is one contiguous file on the HDD, making pagefile accesses quicker.
The Windows page file is a special file that holds data your RAM cannot hold when it reaches its limits. Your system RAM has a limit. If your system tries to exceed that limit, it can pass some of the data off into the page file. It isn't the most efficient way to manage your
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