You might have some software problems.
I have a semprom 3000 with 512 mb ram. I can convert a 700mb AVI file to DVD or mpeg2 in 45 minutes, start to finish.
I use Winavi video converter to do all my conversions.
As far as a faster computer, I have a intel coreduo 6300 (lower tier coreduo processor) , and it takes the same 45 minutes to convert AVI to DVD or mpeg2. But a coreduo will definitely make a difference when you convert DVD/mpeg to AVI, it is literally twice as fast(even the base 6300 model).
Your P4 3200 is definitely fast enough (faster than a semprom 3000) you shouldn't be spending more than an hour to convert avi to mpeg2.
It might be cheaper to just try out different video converting software.
Only upgrade your computer if you are going to do alot of dvd to AVI coversions.
