It's been a long time since playing Kotor2... I seem to remember some other older games having success with a few tips and tricks. Some of them involved changing core affinity (to simulate running on mono core cpus), disabling audio hardware accelleration, running the game in Windows 2000 compatibility mode (for some reason, some games like that better than Windows XP compatibility) etc.
Of couse, I'm a pack rat, so I actually have an old P4 computer tucked away somewhere for playing old stuff on
Edit: I wonder if it wouldn't be possible to play Kotor2 on VirtualPC?