Disk I/O makes desktop unusable. System consumes too much memory

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http://askubuntu.com – I have a long-term problem with my Acer TravelMate 3002WTMi (Pentium-M 1.73Ghz, 512 MB RAM) and Xubuntu 11.10. Whenever load increases machine tends to slow down to the point that it's totally unresponsive (for 10-30 sec. intervals which is very annoying). It always happens when i.e. Gmail and Youtube tabs are open with a browser.. I've been running Linux on desktop machines with less memory but I don't recall having such problems, besides I chose to run Xubuntu so it's really hard to blame memory. Nevertheless OS reports this memory usage while ONLY running xterm and default desktop (after dr (HowTos)