Upgrade to 2GB RAM. This is standard for any system nowadays used for gaming. You may be able to add 2 more 512MB sticks to your computer, but I do recommend replacing your current RAM with 2x 1GB instead to prevent any RAM compatibility issues.
Make sure you are patched to v1.4 or v1.5 (UBoat addon). These patches have memory optimizations.
Might be helpful if we knew what video card you are running, and at what resolution you are running the game at? Can you try any lower resolutions?
Some of the graphics options have a very heavy impact on gameplay performance. Volumetric Fog and Environmental Effects in particular come to mind.
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