your problem for your system hanging is : not enough RAM. You have 2GB - 256MB = 1.8GB~ for the whole system. Your apps hang because the OS takes 1 GB of RAM (roughly) by itself, so about 0.8GB for your apps, way not enough! Everything is running off swap or page file! If you cannot upgrade your system ram, I suggest that you try a light-weight distribution or flavour, like Lubuntu.
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