Just to butt in here a bit.
The main issue here is the slowdown when the game advances one turn, ie. moves from one day to the next. That particular slowdown is caused by the game engine processing all the AI and event related stuff.
Noticed that myself when playing the latest beta's, while I was still using my old, trusted AMD XP1600+ system. My slowdowns were in the ballpark of 1-2 seconds. And, in fact, this is perfectly in line with what the OP experiences. When comparing speeds, a P4 1.8 GZ compares, roughly, to something like an 1.0 or 1.1 GHz Athlon. So my 2 second speed bumps scale to something like 3 seconds on his processor.
And before you burn Paradox: The minimum system specs on the box apply to the original 1.0 version, not the later versions. And, especially with the 1.04 beta's, there were a lot more events, and with a lot more complicated event triggers. That all needs CPU time to evaluate. During the public beta process I explicitly experimented with this, by simply disabling all those events. And, all of a sudden, the game was lightning fast. Put back the events, and the speed bumps were back too.
And minimum specs are just that, minimum specs. They simply indicate what you must have in order to run it at all. It says nothing about how smooth it will run. Same applies to minimum specs of Microsoft operating systems. Ever checked min. specs for XP? You will get a good laugh out of them. The norm is, usually, that recommended = minimum times 4. Which, in your case, would yield something like a PIII running at 1.8 GZ, with 512 MB RAM. Unfortunately, there is no PIII at 1.8 GZ. The nearest P4 speed equivalent would be a 2.8 GHz model. And, as you can see in the thread, people running on that kind of hardware report they don't notice the speed bumps.
As a side note: The event writers have been made aware of this issue, but it's really a choice between a rock and a hard place. The current, much enhanced, event system needs those elaborate triggers to work properly. Remove that, and the game becomes much less of a challenge.