If you find a codec alternative, you won't need to bother with this...but I would try importing a jerky clip into Premiere and rendering it out in decent quality Windows Media -- if the clip plays smoothly once rendered, you'll know it was just a playback issue and not any actual problem with the clip itself. Huffy is primarily an editing codec and not designed for playback...my laptop had similar specs to your computer and it definitely dropped frames if I tried to just play a clip.

Re your comment below, the reason to edit in very high quality is so that you can eventually produce a variety of different renders (in my case, both DVD and online distribution versions)...edit at full quality, compress at the end. This became important to me over time -- I definitely didn't worry about it much with my first couple of vids or I would have been too frustrated to continue.