Jarrod,
It's assuredly a hardware issue. First off, 3GB's isn't enough RAM to run your system and render HD video despite having two processors. Also, your editing software may not work with dual processors or may not be configured from your end to do so. There's probably a bottleneck with the data streams and the issues brought up by the other posters may be in play.
Depending on your type of RAM, you may need to bump up to 6, 4, or 8GB to get good renders without bogging down the machine. Also, what version of Windows (not spelled with 'doze') are you using? Right off the bat if it's not the Pro Version that's part of your problem. The Home Versions were never intended for true video editing whereas the Pro version is.
In the meantime, do as psuedo suggested and do some renders of short clips 2-5 seconds to see isolate the issue. In the meantime, I'd check to see what your system's max memory capacity is and start stocking up on RAM.