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Premiere is pretty notoriously unstable. I really think your friend will be seriously contemplating suicide trying to use Premiere, especially version 2, with that setup.
You might want to consider adding the plug-in Prospect HD from Cineform to ease the burden on your CPU. Then you might be able to use that chip to edit smoothly. Otherwise, I think the demands of native m2t HDV will overwhelm that chip.
But the trade-off with Prospect is much larger file sizes, which is why a large fast RAID might help.
Never, ever, try to overclock an editing machine. You're in for a world of hurt. And 2GB total RAM is way light. As someone who's grappled with Premiere's lousy memory handling I can tell you this from experience.
Just my .02...
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