The amount of video memory is pretty much ok. My Radeon also "only" has 512MB and everything runs at 40+ fps at high settings.
2GB and the CPU also are enough for a decent game experience, just do like me, and get a usuable graphics card off ebay for about 20 bucks and have fun.
40+ on high settings, means you've got grass disabled, all distance sliders at 30-40% (or maybe less) and propably shadows off as well. Otherwise, the VRAM requirement would eventually reach 750-800MB and every now and then, you'd be counting frames, instead of playing.
A RAM of 2GB is enough on a machine with WinXP installed, where the OS loads just 128MB. On Win7 or even worse, WinVista, OS requirements go much higher. This, besides the basic background applications, like audio/graphics drivers and virus scanner. When the user takes a barebone system environment like this and starts loading his/her own applications on, 2GB is simply, not enough.
Apart from this, we're all making unnecessary guesswork on the OP's actual system specifications.
Elric, please post a Dxdiag report (make sure you put it in a spoiler tag)