Enableing Smart Poxy causes computer to locks up

[westlight]

First off most of my problems are probably due to a system that is a bit low on resources. Given that.
I had a project that I saved without having the Enable Smart Proxy enabled. I got jerky playback when playing the "Project". I thought after reading a few post that perhaps I should enable Smart Proxy. I did have Instant Playback selected right from the start. When I enabled the Smart Proxy my computer complete froze up.
Should I be using Smart Proxy and should Instant Playback be selected as well?

I'm sure more info will be needed, perhaps not. I'm also sure a new PC will be needed, but for now, any suggestions. Here are the Project Properties.

NTSC drop frame (29.97 fps)
MPEG files
24 bits, 1440 x 1080, 29.97 fps
Upper Field First
(MPEG-2), 16:9

Captured with Canon HG-10.

Thanks, David[/img]