Actually you're more then fine with a 7,200RPM drive, the video card is great, and 2GB RAM is far more then adequate.
A standard compressed HDTV stream is only 19.2Mbit/sec which is only 2.4 Megabytes/sec and that isn't challenging to a 7,200RPM drive.
I honestly don't know why off the top of my head things would be so messed up.
First, make sure things are running properly, do you have any unknown devices in the Device Manager? are the SATA drivers properly installed? All of this is done for you by Dell normally.
Next, I am not sure of PowerDVD's ability to play transport streams. I know most in the HTPC community don't use PDVD, we use NVIDIA's DVD Decoder for multiple reasons.
Before you abandon PDVD totally grab the
HDTV Pump filter, this is a special filter made to help playback digital TV transport streams in pretty much any media player you want. Then try opening the files in say Windows Media Player. WMP may tell you it doesn't know what a TS is but you can ignore that and have it play the file anyway. Another application that can play HDTV streams is the excellent open source
Media Player Classic.