A PC with 2GB of RAM should not have any issues with running a JBossAS set with a 1GB heap (which is what I think you meant by the JAVA_OPTS lines you posted, but I am not sure, those lines do not look like anything in run.bat).
I have a PC with an old Pentium 4 processor and only 1GB memory running Windows 2003 with JBossAS + Portal. That PC is also running IIS, Apache HTTPD and MySQL, and I have not noticed any significant performance issues (web response is fairly quick).
Do you also have oracle running on that system? Oracle takes up a lot of system resources. If it is using all of the memory, then you are probably experiencing a lot of thrashing as both Oracle and the JVM fight for memory.
Have you used PerfMon to monitor the system to determine where the bottleneck might be?