1,2 & 3: This is perfectly normal with your system specs and the use of AVCHD and CS4.
4: CS5 is much, much better.
5. For CS4 the video card is almost irrelevant. Any $ 30+ card will do and not impact performance.
If you want to upgrade to CS5, the story changes significantly.
You need a new computer. Your current system is way underpowered for anything more than DV. This applies both to CS4 and CS5, btw.
Read the articles shown when pressing the Overview tab at the top of the forum and read some threads. You will find interesting information on systems.
To give you an idea of what your system can do in comparison to a fast, modern system, my guess is that it is around 80 - 120 times slower.
I don't think a core-2 will work very well with AVCHD... you need at least an Intel i7 920... or whatever is current
My CS5/AVCHD 1st Impressions http://forums.adobe.com/thread/652694?tstart=0 includes a link to the computer I built... since the GTX 285 is no longer sold, I would now go with a GTX 460 or whatever is the current "best bang for the buck" - AND I would buy 4Gig-by-3Sticks memory to be able to expand from 12Gig to 24Gig if needed
For my home hobbyist, family movies (which means that I am not trying to recreate Star Wars with video effects or many layers) AVCHD editing is "as smooth as spreading warm butter on hot toast" (also the MP4 video from wife's Flip camera)
My 3 hard drives are configured as...
1 - 320G WD Win7 and all programs
2 - 320G WD Win7 swap file and PPro projects
3 - 1T WD all video files... read and write