Posting a dxdiag would help.
But if I understand your posting correctly, you only have 256 Mb of video memory, which is the minimum for AH. You don't tell if you're using a laptop or a desktop, or if you're having a separate video card or a built-in one. If you're running on a built-in video circuit, it'd be using your computer memory which is much slower than that of a video card.
Most likely you're suffering from too little resources. I don't remember any exact dates, but the latest bigger update raised the minimum requirements.
Figured the dxdiag would help *facepalm*
Desktop
Separate video card.
Here is the DxDiag
Tinkles
<<S>>
------------------
System Information
------------------
Time of this report: 6/21/2013, 13:57:43
Machine name: RACHEL-DESKTOP
Operating System: Windows XP Professional (5.1, Build 2600) Service Pack 3 (2600.xpsp_sp3_qfe.130503-0418)
Language: English (Regional Setting: English)
System Manufacturer: System manufacturer
System Model: System Product Name
BIOS: Phoenix - AwardBIOS v6.00PG
Processor: Intel(R) Pentium(R) D CPU 3.40GHz (2 CPUs)
Memory: 2046MB RAM
Page File: 1080MB used, 2857MB available
Windows Dir: C:\WINDOWS
DirectX Version: DirectX 9.0c (4.09.0000.0904)
DX Setup Parameters: Not found
DxDiag Version: 5.03.2600.5512 32bit Unicode
DxDiag Previously: Crashed in system information (stage 4)
------------
DxDiag Notes
------------
DirectX Files Tab: No problems found.
Display Tab 1: No problems found.
Sound Tab 1: No problems found.
Music Tab: No problems found.
Input Tab: No problems found.
Network Tab: No problems found.
--------------------
DirectX Debug Levels
--------------------
Direct3D: 0/4 (n/a)
DirectDraw: 0/4 (retail)
DirectInput: 0/5 (n/a)
DirectMusic: 0/5 (n/a)
DirectPlay: 0/9 (retail)
DirectSound: 0/5 (retail)
DirectShow: 0/6 (retail)
---------------
Display Devices
---------------
Card name: NVIDIA GeForce 7600 GS
Manufacturer: NVIDIA
Chip type: GeForce 7600 GS
DAC type: Integrated RAMDAC
Device Key: Enum\PCI\VEN_10DE&DEV_0392&SUBSYS_06221462&REV_A1
Display Memory: 256.0 MB
Current Mode: 1600 x 900 (32 bit) (60Hz)
Monitor: Plug and Play Monitor
Monitor Max Res: 1600,1200
Driver Name: nv4_disp.dll
Driver Version: 6.14.0013.0783 (English)
DDI Version: 9 (or higher)
Driver Attributes: Final Retail
Driver Date/Size: 2/8/2013 05:03:00, 4494336 bytes
WHQL Logo'd: n/a
WHQL Date Stamp: n/a
VDD: n/a
Mini VDD: nv4_mini.sys
Mini VDD Date: 2/8/2013 05:02:44, 12648960 bytes
Device Identifier: {D7B71E3E-40D2-11CF-DD74-2F2600C2CB35}
Vendor ID: 0x10DE
Device ID: 0x0392
SubSys ID: 0x06221462
Revision ID: 0x00A1
Revision ID: 0x00A1
Video Accel: ModeMPEG2_C ModeMPEG2_D ModeWMV9_B ModeWMV9_A
Deinterlace Caps: {6CB69578-7617-4637-91E5-1C02DB810285}: Format(In/Out)=(YUY2,YUY2) Frames(Prev/Fwd/Back)=(0,0,0) Caps=VideoProcess_YUV2RGB VideoProcess_StretchX VideoProcess_StretchY DeinterlaceTech_PixelAdaptive
{335AA36E-7884-43A4-9C91-7F87FAF3E37E}: Format(In/Out)=(YUY2,YUY2) Frames(Prev/Fwd/Back)=(0,0,0) Caps=VideoProcess_YUV2RGB VideoProcess_StretchX VideoProcess_StretchY DeinterlaceTech_BOBVerticalSt
retch
{6CB69578-7617-4637-91E5-1C02DB810285}: Format(In/Out)=(UYVY,YUY2) Frames(Prev/Fwd/Back)=(0,0,0) Caps=VideoProcess_YUV2RGB VideoProcess_StretchX VideoProcess_StretchY DeinterlaceTech_PixelAdaptive
{335AA36E-7884-43A4-9C91-7F87FAF3E37E}: Format(In/Out)=(UYVY,YUY2) Frames(Prev/Fwd/Back)=(0,0,0) Caps=VideoProcess_YUV2RGB VideoProcess_StretchX VideoProcess_StretchY DeinterlaceTech_BOBVerticalSt
retch
{6CB69578-7617-4637-91E5-1C02DB810285}: Format(In/Out)=(YV12,0x3231564e) Frames(Prev/Fwd/Back)=(0,0,0) Caps=VideoProcess_YUV2RGB VideoProcess_StretchX VideoProcess_StretchY DeinterlaceTech_PixelAdaptive
{335AA36E-7884-43A4-9C91-7F87FAF3E37E}: Format(In/Out)=(YV12,0x3231564e) Frames(Prev/Fwd/Back)=(0,0,0) Caps=VideoProcess_YUV2RGB VideoProcess_StretchX VideoProcess_StretchY DeinterlaceTech_BOBVerticalSt
retch
{6CB69578-7617-4637-91E5-1C02DB810285}: Format(In/Out)=(NV12,0x3231564e) Frames(Prev/Fwd/Back)=(0,0,0) Caps=VideoProcess_YUV2RGB VideoProcess_StretchX VideoProcess_StretchY DeinterlaceTech_PixelAdaptive
{335AA36E-7884-43A4-9C91-7F87FAF3E37E}: Format(In/Out)=(NV12,0x3231564e) Frames(Prev/Fwd/Back)=(0,0,0) Caps=VideoProcess_YUV2RGB VideoProcess_StretchX VideoProcess_StretchY DeinterlaceTech_BOBVerticalSt
retch
Registry: OK
DDraw Status: Enabled
D3D Status: Enabled
AGP Status: Enabled
DDraw Test Result: Not run
D3D7 Test Result: Not run
D3D8 Test Result: Not run
D3D9 Test Result: Not run