Flight Sim 2k2 is very CPU intensive but a 1 GHZ CPU should work just fine. It might not be your CPU giving you problems rather your memory. As you found out XP is very bloated with background processes. How much RAM do you have? If you do not want to stop some of the processes then adding more RAM will help because it will not be using the swap file on your hardrive. Basically, once your RAM is used up, it will start using your hardrive like RAM which is not nearly as fast as RAM. Hence the choppy play.

Stopping some of the processes might work for you but I would make sure you have at least 256 MB RAM, preferably 512 MB. Windows XP by itself right after a fresh install takes about 100 MB of RAM right off the top. Add to that any programs ie.virus scanner, instant messenger plus the game itself and you will be close to using ~ 500 MB of RAM.

Let me know how much RAM you have and we can go from there. I have been using flight simulator for years and have gone through all of this before.