Yes it jumps... i'm not sure about the settings.. I just downloaded the program a couple days ago.. haven't really used it... I know I have 3g of ram...
Okay, here's the situation as I understand it. You've got at least two things working against you. The first is that all flavors of AVC are processor intensive. The second is that the Vegas timeline doesn't perform nearly as well as a standalone player or even Vegas' trimmer. This second point is probably because Vegas needs to track all sorts of things when you play something on Vegas' timeline.
There are a few common ways to deal with this:
a-Don't use AVC media. Transcode to something less processor intensive like Vegas' MXF, Cineform, Avid DNxHD, Lagarith, HuffYUV, etc. Almost all of these will take time to convert to and they'll take up more hard drive space, but they'll perform better.
b-Get the fastest processor you can possibly afford. Add to that a large amount of memory (4 to 12 GB or more) and 64-bit Windows 7 (to make use of the memory)
c-Use a reasonably fast second hard drive for all your Vegas media files. You want this separate from the drive that holds your Windows page file. Some people use several drives but at least have the one additional drive.
d-Don't go crazy with Vegas' preview RAM setting. This sets aside RAM for Vegas to cache video frames but it also takes RAM off the table for anything else Vegas might need to do. Too high a setting can actually starve Vegas and Windows of memory.
e-You don't need to sink tons of money into a graphics card but at least get one that can support a couple of hi def displays. (Sony just announced CUDA rendering support for ONE codec in VMS but not yet in Vegas Pro. It's a small step but suggests that an nvidia card might be the better choice.)
Yes, it would help your situation. You could go faster than that, though. Add a second hard drive for your video files. Don't focus too much on the graphics card.