It is a sad joke that FC kills my AMD 9950 and GTX 260 with 4GB of RAM so badly that it is unplayable.
Must be something with your rig mate! LO:FC 1.12b runs fine for me maxed with 50+ FPS (still FPS hit down low over cities and self shadows are broken but thats known issues) and I have similar setup as you, C2D E6850 @ 3 GHz, 2 GB RAM and a GTX 260 191.07 WHQL on XP Pro, running LO:FC @ 1280x960 with AF x16 and AA x8.
Worked pretty OK on my old AMD 2600+ with a GF6600 as well even if I had to tone things down a bit.
BTW, I'm really looking forward to FC 2.0 and to see some mixed op's with rotary and fixed wings aircrafts. I think it will be a blast to have fast movers joining the DCS world quicker than we expected and I'm confident it will breath new life in LO:FC MP due to it's built in MP lobby and seemless join-in progress. If done right I actually think TFC/ED have a real winner here, FC 2.0 for those who not got the time (or interest) to learn a study sim and DCS:X for those who like switches and prefer going all-in!
Actually this recent news made me reconsider my previous stance on DCS: Black Shark so now I'm learning to handle the Ka-50

PS: Nice to see you still around Mr. Jim and you need to update your sig. pointer to NoSIG, new URL....
/KC