How much defragmented free space do you have on that 160 GB HDD? Remember that PrE needs much more HDD space for working files, than for just the Export. That is likely one of the issues.
Also, see this ARTICLE for ways to tune up your system for NLE work.
Good luck and welcome to the forum,
What is the source and format of what you are trying to export from the Premiere Elements 2 Timeline? If you are not sure, what is the brand and model of the camcorder from which it came? If you are not sure of the properties of the Timeline content, you could take it into the free gspot software to see what you have.
Do you have the last version of Quicktime installed on your computer? What version of Windows Media Player do you have installed?
If you have 512 MB installed RAM, you are probably running Premiere Elements 2 with far less than that. You can use the computer's Task Manager Performance to check out what is going on with your computer memory.
Although your computer looks like it could use some updating, I wonder... I have a broken down laptop with 512 MB installed RAM, about 40 GB free hard drive space (local drive, no external), Premiere Elements installed, and can export at least a 3 min Timeline content. So, your problem may involve more than one issue.
But, I would increase the installed from from 512 MB to at least 1 GB or more, depending on what the computer motherboard will support.
(no multitasking when running Premiere Elements).