I reckon you mean 2GB of RAM
This is about the minimum I would recommend, but does not seem the main reason to me.
20GB free on your HD is pushing it I think. Even though HFS+ (Apple's file system) is pretty good at keeping file fragmentation at bay (certainly compared to windows' file systems), it is not immune to it, and especially not to fragmentation of the free space. The less space there is on your HD, the harder it gets for the OS to keep (large) contiguous pieces of free space available, eventually leading to more and more fragmentation and a general slowdown of your system.
Try freeing space, for instance by moving files to a secondary HD.
Upgrading the processor is most likely not going to help you at all; applying IPTC info is not CPU intensive, just I/O (disk) intensive (all files need to be read and then written again).
As a further question, what are your PM cache settings? Perhaps you can gain something by tweaking those a bit as well?