It's the video card. The Nvidia FX series is designed for DirectX 8.1 support, and the newer DirectX 9.0c additions are performed through software emulation.
This said, you'll want to tweak your settings according to THIS guide:
http://eqiiforums.station.sony.com/eq2/board/message?board.id=tech_support&message.id=3265
At the least, turn off bloom effects, shadows, and test for lag by running around Qeynos harbor near the bridge, or in South Qeynos near the apothecary shop (poison symbol on map). I'm not sure where the most laggy places are in Freeport.
There's about 40 settings you can hand tinker in the above mentioned guide; it's the perfect resource for tuning the video in game. Consider your system an "old system" in as much as the video card really is old style (DX 8.1 in hardware).
That said, you should be able to get the game running well after tuning down the video options.
- GS