IFTB, there's bound to be an overhead with any software that monitors activity in real time, but I must say I haven't had the sort of problems that you've experienced. I'll have a look at my setup at home and see whether I can make it cause that kind of slowdown for me.
Couldn't just be a memory problem, could it? How much memory do you have on your XP system? (I have 256MB.)
Cheers