That 2gig of ram would also make a huge difference to editing performance. I have been using Pinnacle studio 10+ with 1 gig of ram and it worked ok, I have just increased the ram to 2gig and it is flying along now.
I would still go for the Pentium, Add a second huge hard drive soley for video capturing.
Your master drive, I.e Software needs not to be so huge. But WITHOUT a doubt, capturing should be done to a totally seprate drive. If you are expecting to use Adobe Premiere, Audtion, Encore, they expect you to have one.
1 GB of RAM should be fine, for video editing you need processing power.
Graphics card is not important in so far as Video editing, although PCI express is ment to have an advantage because of bus speed and helps when playing back video.
If you are really tight on budget then perhaps the AMD route, but I wouldnt myself.
...its all becoming clearer now...when you say use a dedicated hdd for the video, would an external unit be ok, or does it have to be internal?? Would the Pentium dual cpu be more beneficial than the AMD?