It is probably the Graphic card. You need a Graphic card and a driver for it that supports the card and GLX version 1.3 or AIGLX. (If AIGLX is supported, so is GLX 1.3). The nVidia driver for your card does probably not support AIGLX and supports only an older version of GLX.
Most of the nVidia cards have drivers that support this, but yours is probably too old. It does not have to be expensive, just newer.
I don't think there is any limit for the CPU as all the visual effects are hardware optimized, and the main CPU is hardly used to render the effects. However, your CPU will probable slow down the framerate so much that some of the effects would just look too weird. Others (Like ALT-TAB Thumbnails ) will run just fine, I guess. You can turn effects on and off as you like. If you just want to compare your system to Vista, you can disable almost all of the effects, and just leave the windows thumbnails effects.
This said, I guess your computer can be able to run Compiz Fusion, but then again it will be slow. Normally you CPU only have to render visible windows, but whit Compiz Fusion your CPU will also render off screen windows and elements. This means your computer will be slower then Compiz Fusion is enabled even if your disable all the effects. Browser windows with Flash or Java based commercials will be extremely CPU expensive so they probably blocks you from browsing any site.
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