Personally I reckon your machine needs a right good slash and burn of the OS.
The hardware with the PSU i would be suprised at it only taking the graphics card down and not other things as well. Hesitating and black boxes filling would indicate to me that there is lots of swapping of memory going on. Is your hard disk LED going constantly?
A cheap mans way of getting graphics memory is by grabbing some of the main system memory when you start running at high resolutions it grabs more and more memory. Start using 3D functions on your desktop and it gets even worse. An openGL 3D pipes screen saver used to have machines running at .89-1 load constantly when activated. The less main memory you have the more the OS swaps to disk. Lots of applications open and it gets worse and worse. Add in a load of desktop services and your machine just runs out of grunt.