Well I've edited DVCPro HD on a P4, and I've transcoded HDV to DnxHD 145 (I think it was) and edited that. OK, I wasn't editing lots of layers or getting real time playback of some effects.
It was (Still is unfortunately) my work's computer with an old Nvidia card (5700 256 m4g), now replaced by a 7300 512 meg) with 1.5 gig ram, and editing off USB2 drives and running Avid Xpress Pro HD.
Currently I use a dual-core laptop running Avid MC and my main drive is a 1TB eSATA, so not much more powerful.
I reckon your P4 will most likely do for now, but budget for something more powerful in the near future.
Dave
I'm still trying to figure out why I can import and color correct native 7D files in premiere CS4 just fine with smooth playback. Granted, it doesn't have the headroom of P2 material but I'm not sure why I should be using an intermediate codec/format.......unless that IS the reason.
What NLE are you currently editing with? If you are using Vegas 9/32bit, you could give DVFilm Epic I a try. It lets you make epic files that are full, half or quarter resolution so if you use the quarter resolution it will be close to your 720x576. You can also switch back to the original files if you need to with a click of a button.
Here's a link with more information and there is a free demo: www.dvfilm.com/epic
Your system should be able to handle realtime playback with the quarter size epic files. You could also try using it with Vegas Movie Studio if you have that NLE.