Unexplained lag spikes in WoW

Hi, I am receiving some very bad lag in WoW, literally 0-1 fps for an idea of what this is like-imagine taking 1minute to turn your character around. This is not random it happens when I am in a city or near alot of players such as a raid. With that being said it would seem as though it is an internet affair but my ms is fast and at a very low 256.

When I am not near players my fps is from 50-80 which is 'perfect' gameplay, all my settings are on super low, vertical split disabled as well as triple buffering.
I have notice that if I am far and i face a congested area of players i lag, If I were to get in that area and manage to turn to not face the players, I am playing perfectly again, then turn back around same problem! THAT makes me mad.
Please Help.

My system:
Monitor 60Hz
Cpu is Intel Celeron 3.46Ghz (always at 100% during incident)
250gb HDD
2.5GB DDR2 Ram, pc only recognises 2GB of it though 667Mhz speed
512mb Nvidia Video Graphic Card
 
close all runing programs that dont need to be runing!ctr,alt + Delete,go into task manager through control panel either,should help a little bit!
 
I lag too and my system is high end. It has to do with server lag, there is no avoiding it except to go to a less populated server. There are only so many people that can be on a server at once and when that number is exceeded, the lag comes. It is that way in every online game. I never lag when I use Dungeon Finder and I am with 4 others for a 5 person party because 5 people in that area is the max.
 
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