Mate, I have 90% of the same setup as yours on a test machine out here (P4 2.4Ghz, Gigabyte 845, 512MB RAM) and the video display is pretty good. Have you installed the Intel 845 graphics
drivers?
Besides that, I can think of a couple of other solutions:
1. Check the refresh rate of your monitor. I'm assuming you have a CRT and those units are particularly choosy about the Hz rate.
2. Try installing better codecs - something like the
K-Lite Corporate pack should suit you just fine.
3. Use
VLC rather than WMP.
4. Use full hardware acceleration under Display properties - advanced settings.
Failing all of that, maybe you could buy yourself a cheap P4 3Ghz or a Radeon 9xxx PCI based card off eBay. Nobody seems to want them any more but these components make for some bargain basement priced test machines and music servers at home or in your case, a pretty significant upgrade.