By coincidence, one of our machines has a Core 2 Duo E6600 (quick, innit?) and contains a Hauppauge TV card.
To answer your first question, we would not recommend recording TV directly from the card. As you have found, it's clunky.
Instead, I'd recommend using Windows Movie Maker (WMM) or something similar for the recording process. With the media centre, you can record using WMM direct to the MPEG2 format required for DVD-burning.
In WMM, when you click on 'Capture from video device', your Hauppauge card icon should be shown in the Available devices: window (along with anything else plugged in such as a camcorder).
Click on the Hauppauge icon and set up the various input source options as appropriate ('TV tuner' if you're recording a TV prog). Then follow through the rest of the WMM set-up pages and start recording.
To answer your second question, video transcoding is unavoidably a massive number-crunching exercise for any computer and the timing is about right for your machine, not helped by the fact that Windows DVD maker is not (as far as I know) 'dual-core aware', so the second processor isn't used.
We routinely use Ulead's splendid VideoStudio and that works 100% with the Hauppauge card as the video source (including external analogue sources such as a VCR, plugged into the card's AUX sockets). VideoStudio is 'Dual-core aware' and certainly speeds up transcoding by around 30-40%.
HTH. Does anyone know of any other video editing progs which are dual-core aware? Pinnacle perchance?