Ubuntu – My laptop can’t play HD movies without stutter, via stream or VLC. Graphic Card problem

I am on a Dell Latitude D430, Intel® Core™2 CPU U7600 @ 1.20GHz × 2, 2GB Ram, Graphics Intel® 945GM x86/MMX/SSE2 and running Ubuntu 14.02 32bit.

Whenever I play movies that are 1080p, VLC starts stuttering like crazy, the whole system basically jams, CPU consumption goes through the roof and even firefox is so slow. I stopped getting 1080p movies altogether to avoid these frozen states.
With 720p movies the situation is a bit better. Mostly they work fine, but every once a while VLC starts stuttering and pixelating. If I press pause and wait for a minute, the CPU seems to "cool down" and I can resume playing without problems.
Sometimes even on youtube, which is automatically set at low res, 360p, the play stutters and this is certainly not the internet which is 500mbps and also streaming is fully pre-loaded.

I at first thought that this could depend on the slow CPU. I have run terminal -top to check CPU consumption and it looks high, when I play movies it goes up to 120 or 130% consumption, but I think this is still ok, since it's a dual core, so maximum should be 200%, right?
I worry the problem is maybe with the integrated intel graphic card. I have found many users complaining about this running ubuntu, with my same exact model.
The drivers are correctly installed and everything seems kosher, if it wasn't that performance is very bad.

So my question is: is this problem with Ubuntu? if I install iOS Luna or another distro or even (yuck) putting on a Win7 would I be able to play movies normally? I think the laptop specs should be enough for at least a 720p movie and I use mainly my laptop for movies as it is connected to my tv.

if the problem lies with the specs insufficient to play HD movies, should I buy a graphic card or is it the CPU that it is too slow and I need to just resign myself to get a new laptop?

thank you