My camera's video format is MPEG4 H264.
Almost all the videos I download are from YouTube and they are also MPEG4 H264 which seems to play smoother on my P4 than the videos shot with my own camera.
The math on resolution gets pretty bad pretty fast. To dump the pixels on the screen you're talking about width X height X bits per pixel @ a given fps. Before they even get that data to the screen they have to decompress that given frame (that's what video codecs and container formats are all about). To a consumer that one bump up in resolution and frame rate doesn't seem like much-- But do the math on increasing the w X h X bpp @ fps, with a bigger frame to decode, and it gets ugly fast.
Also, not all video encoders are equal, and the settings of the video encoder matter a lot. There is some chance that your camera may not be doing an optimal encoding, or an optimal encoding for speed. Unless your camera has a newer firmware out, you're pretty much stuck with what you got.
That's why fast cores, on a fast low latency bus, with fast low latency RAM, means a lot here. If you have that, integrated video will do, but any current generation - 1 video card in the $120 - 150 range would serve you well for years to come.
As was said, spring for a new tower-- It doesn't have to be a huge spend. Consider getting one with an OK dedicated video card. Pretty much anything at the $500 price point will probably serve you for another decade. Buy a $50 USB Hard Drive enclosure (with no drive in it) for your old type of hard disk (IDE, not SATA probably). Pop your old drive into that. Scan it for viruses, and copy your files over. Format the old drive as a big dumb USB disk, or keep it in a safe place as a backup.