I heard that reducing the render distance in game will lag you even more, was in alpha and over heard half of a conversation so maybe it changed since then.
Try playing the in-browser on minecraft.net, that runs better for me on one of my computers. Would close any other program that is running too while you play MC.
I also have a memory upgrade for MC which is really great, can PM you it later if still interested, need to get on my computer for it though.