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Thank you for the details.
As there are several popular MJPEG CODEC's, and not all work perfectly with all cameras' footage (camera mfgrs. love to tweak CODEC's, and this can create problems). Now, if you installed the Canon's driver, and also the editing, cataloging program(s) that came with the camera, you should have Canon's version of the MJPEG CODEC. I do not know that particular camera, but Canon historically has included, and installed, their flavor of all used CODEC's, along with the Canon software. As that is "historically," I would also look on that CD/DVD, to see if there is a CODEC, and installer, outside of the camera's driver and the various Canon utilities. If so, I would install it.
Now, you have Win7 Ultimate. Is that the 32-bit, or 64-bit version of the OS? This makes a difference.
You have 2GB of installed RAM. This is low, for either OS, and extremely low, if you have the 64-bit version of Win7. It needs about 4GB of physical RAM, just to run itself, and 12GB of RAM would be much, much better. Please let us know if you have the 32-bit, or 64-bit version of Win7.
Now, there is memory, and then there is memory. First, one is talking about the installed RAM, of which you have 2GB. Next, there is Windows' Virtual Memory. This is assigned HDD space, that is used like RAM (but is slower), and is seen as the Page File. This comes into play, when the the OS runs out of physical RAM. The Page File can be set to be managed dynamically, or statically. Dynamic management is the default, and with it, Windows will change the size of the Page File, in anticipation of its use. This makes things a bit easier for the user, but is less efficient in several ways. First, the OS sometimes does not anticipate the need for Virtual Memory correctly. It does a good job, if one is doing "average" computer work, like surfing the Web, doing e-mails, creating a word processing document, or working on a spreadsheet. Video editing is not what the OS normally "thinks about," and is often blind-sided by the program's needs for more Virtual Memory. Also, the Page File needs to be defragmented, contiguous free space, and depending on the location, i.e. which HDD it is on, and the condition of that HDD, this might, or might not, be easy to find. With a system that does video editing, I feel that a statically managed Page File is better. It builds the Page File at bootup, and will build it in the same place every time. As it is built at bootup, the defragmented free space that you assign it, should never be filled up by any other files, as all programs will be launched AFTER the OS builds the Page File. I would recommend setting the Virtual Memory to a static Page File size, but before I did that, I would make sure that the destination HDD had just been defragmented.
One set of specs. that I did not see was your I/O, i.e. your HDD's, their number, size, speed, controller type, and how you have them allocated. If you could tell us about your HDD's, that might change things a bit.
Back to the Page File, for a 32-bit OS, my recommended size would be 2.5x as much installed physical RAM. In your case, this would be about 6GB. With a 64-bit OS, and the larger installed physical RAM capacities with the 64-bit OS, that factor falls. With a 64-bit OS and 24GB RAM, the Page File would see little use, so a 1:1 ratio would probably be fine. With a system, with but 2GB of installed physical RAM, the Page File WILL get a lot of use, so should be large enough to accommodate what the OS and the video editor will need. As the Page File will be slower than RAM, the system benefits from having a statically managed Page File. The size is already there, so the OS does not have to anticipate the needs, and with a dynamically managed Page File, the CPU has to do quite a bit of work, computing how large, or small to make the Page File. If statically managed, there is no guessing, and no additional CPU usage - it is just done at bootup, and is sitting there, waiting to be used. This frees up CPU cycels for the video editing program.
This ARTICLE goes into more detail on Windows Virtual Memory - the Page File.
Now, besides the installed physical RAM and the Page File, there are other things, that come under the heading "Resources." These could be programs, or processes, that launch at boot-up. This ARTICLE starts off with some tips for eliminating problems, or potential problems, with PrE, and then goes on to offer links to some useful articles on tuning up one's computer in various ways. Then, it lists several articles on troubleshooting crashes or hangs. I strongly recommend that one start at the beginning, and then just work through things in a linear manner.
Your computer is on the very low end, regarding its power, but with MJPEG (with the proper MJPEG CODEC), and a really good tuneup, should be adequate.
Good luck, and please let us know about your HDD's in as much detail, as you can.