The challenge with 32-bit windows 7, is that there is a *lot* of 64-bit only software out there these days, so you may be just postponing issues.
If you're still using the original HD in that machine, you might check out Smart Utility from Voltain's software and make sure it's not starting to fail (which can also cause some of those symptoms).
I suspect that you're starving the host for RAM, so the first thing I'd do is see if the memory upgrade solves the problem. If it does, then you could just leave everything else alone.
What are you using the VM for? That'll help figure out the best path.
