Try installing Catalyst 4.12 drivers, it helped me so much. No more CTD's or lag.
Though the amount of RAM you have still might cause some lagging.
Damn Civ4 has been expensive for me.
First I bought another 512mb stick of RAM and now a new video card. Oh well, it's worth it. 
(and with all the new games coming out somewhat soon [Oblivion,NWN2], I would've had to upgrade anyway.)
EDIT: And for comparison, my video card ATM is Ati Radeon 9550. Getting the new card on Monday.
Though the amount of RAM you have still might cause some lagging.
Damn Civ4 has been expensive for me.


(and with all the new games coming out somewhat soon [Oblivion,NWN2], I would've had to upgrade anyway.)
EDIT: And for comparison, my video card ATM is Ati Radeon 9550. Getting the new card on Monday.