Dropouts can be caused by almost any component in an older system like that. It could be video related or your hard drive not fast enough or your sound card even the mother board, as well as low or poorly made memory.
Sonar needs a well rounded system to run properly, it doesn't need the best (mines only a PIII 800 w/ 256 megs and a sound blaster live) but mixing a highly outdated hard drive or video card etc in with a new system can cause problems. buying the cheapest memory can cause its own problems.
I'd think about the age (and quality) of all parts in the system and upgrade accordingly.
there's several system tweaks that might help, but I don't have time to post them right now. you can search this board for "tweaks"