Less than 512 megs of ram will slow things down. 1gig is even better.
Got to have lots of hd space for temp files too. Use NTFS. Having several partitions cuts down on hd fragmenting.
CPU's, system bus and memory speeds make a big difference. The faster the better. Video encoding is one of the things benchmarked when comparing new systems because it will really put a load on it. Just look at motherboard and cpu reviews at
http://www.tomshardware.com/index.html