After restarting, resetting PRAM and SMC, repairing permissions and cleaning up the computer using Onyx, the computer is working fine. Although it is showing huge pageouts (~4GB), it nonetheless feels marginally faster than my rMBP 15 and there's no lag. The display actually doesn't look that bad either.
What are you doing there with VLC?? It shows it is using 16 exabytes of memory!! Are you ripping a video or something? That is your problem right there.