Well, connection speed doesn't factor into client-side lag for the most part. Since you seem to be freezing up when there's a lot of fighting or a lot of people, I'd suggest the problem is with insuffecient hardware or resources. From the looks of your processor, it wouldn't be able to handle much more than TF2 at one time. I'd suggest closing all background processes, especially virus scanners as flippy said. Those are something you don't need while playing TF2, unless you've got someone with bad security habits on your home network, and even then, you might need to risk it for your gaming. =P
If killing your virus scanners doesn't fix it, hit Ctrl+Alt+Del and check the Processes tab. Sort by RAM usage, and check what's using a lot. If there's anything you can get by without, kill it. Then sort by CPU. Again, if something's using a lot of CPU and you can still play TF2 without it, kill it. If you're unsure, check google, or post what you find here.