A terribly slow internet connection might be a problem.
Nope, I know exactly what the OP is talking about. Around the bank/auction house in cities, dozens of people tend to congregate. And take off their clothes. And dance. Apparently no city square in that game is complete without a night elf exotic dancer.
Anyway.
When too many people cluster together, the game begins dropping frames. On my old Power Mac G5 with 512 MiB of memory, I would be lucky to get 1 fps in the Great Hall of Ironforge. For those that know the game, I ended up in the trench at least twice per visit, but at least I couldn't see the people from down there so my performance greatly improved on my way back out. And I didn't have to look at naked night elves. Which, by the way, is not a phrase that should ever under any circumstances be Googled.
Yes, adding more memory will do a lot to alleviate this problem.