Well, actually I was skeptical about needing an older version, also. But I figured since this computer has much older hardware installed on it that the older ones would have been built for it than any newer ones which need the newer hardware functionality.
Not necessarily true. Vector Linux Light is specifically designed for machines with limited resources, including older hardware. That would likely be the best choice for you.
The Video problem...Well, pretty much when I watch video's from Youtube, the music plays fine, but the video is like watching a slide show.
That's likely simply due to the fact that YouTube requires significant resources to work well. I have 512MB of RAM and that is marginal for YouTube to work. My processor is similar to yours.
Which leads me to think the problem might be something else than the Graphics...I don't know...I have only had it for a few hours, still working on it...
Maybe, maybe not. As phreon correctly pointed out, not all video drivers are created equal and sometimes adjusting settings or changing an option in /etc/xorg.conf can make a huge difference. What kind of a video chipset does your system have?
In addition, do all you can to reduce memory consumption and CPU cycles while trying to watch a video. That could include running a lightweight window manager instead of Xfce (JWM is particularly good for this), using VL-HOT instead of hal since hal continually polls the hardware, making sure unnecessary daemons/services are disabled (a good idea for security anyway), and simply closing any applications you don't need running at the time. All of that can make a difference.