Here are some tips. My wife has a Celery 466, 256 megs, TNT2 Video card and BG2 runs fine on it. It smokes on my Athlon 900.
1) GET MORE MEMORY. Don't know where you got that price, but memory is dirt cheap. 128 meg for $72 and 256 meg for $136 at
www.memoryshippers.com. And that's for PC-133 memory!
2) Make sure you have a decent video card, at least an old TNT2 with 32 meg, but turn OFF 3D in the game. If you have something like an E-Machine with build in video, I feel for ya.
3) In the config, turn it all the way down. Too high a number in pathfinding will slow the game down a lot. Use whatever the lowest config wants. Also, bump the cache in the config up to at least 400 meg since you have the space.
4) As suggested, go back to Win 98 or get Windows 2000. Win ME is terrible with games. Anybody I know that went to Win ME has gone back because it sucks.
Good luck to ya!