Whether you are editing standard DVD video or HD video, I would suspect the lack of RAM, running 64 bit Win 7 resulting in a high load on the processor and hard drive (file paging) are causing the problems - the processor is so busy it cannot respond in a timely fashion to other tasks and appears to freeze..
I would agree with John, AVI export creates very large relative files sizes and while 2GB of RAM meets the minimum requirements, reccomended RAM is 4GB. I am using 8GB of RAM and if I try to export with AVI on a file that is over 15 or 20 minutes, my system struggles with it. My CPU bogs down, CPU temperature rises dramatically, and I do occasionally get what appears to be system lockup. Try exporting as mp4 and see what happens.