I have just been going through this and have finally come up with a setup that works well.
I upgraded my system to:
Intel quad core Q6600 clocked at 3GHz
2GB Corsair DDR2-800
SATA 2 HDD
SATA DVD-RW
MSI Neo2 FR mobo
Nvidia 7300GT graphics (high end not needed for this)
650W PSU
Rendering speed is at or better than real time and compositing is a process without delay. When rendering a 1h long piece of video, it was using over 2GB of memory, so I may upgrade to 3 or 4GB.
For software, I have found Sony Vegas 8 Platinum to be the best compositing/rendering software (somewhat a personal choice) because it works well, is easy to use but powerful and deals with the HG10 AVCHD files well. Vegas also makes full use of all 4 cores when rendering which helps speed things up considerably. I also use it's companion, Sony DVD Architect studio 4.5 to set up and burn the DVD.
These are not expensive pieces of software, Vegas is about £69 and DVD Architect about £25.
I couldn't get the bundled Ulead software to work properly, I didn't like Premiere at all and it can't handle AVCHD.
I hope that this helps.