Joey's fix also works. (Brent please read, it may help you)
From: Joey Majestic
I posted this to a related thread but no one seems to have tried it or replied there...
-snip-
The cause of this "long white bar" in the fast timers display is that some of the texture memory is being swapped out by the system and paged back in. By reducing the VRAM setting SL is less agressive in filling that memory and the swaps shouldn't occur.
-snip-
p.s. You can see how "full" texture memory is by hitting shift-ctrl-3 in debug mode.
Ok OK... I have tested this on my 128MB-based intel iMac. Here's my results:
Scenario 1: Rippled Water set ON, graphics set to default of 128MB
Result: moving around in in circles or using the camera at my home results in crazy stutter and cpu spikes. I can hear the hard drive agressively paging in and out, despite the fact that I have 2GB of system RAM. I think Joey is right here.
HOWEVER the shift-ctrl-3 console shows the video RAM is never full (it never gets "red"

.
Scenario 2: Rippled Water set OFF, graphics set to default of 128MB (Brent's suggestion)
Result: moving around in in circles or using the camera at my home results in no perceptable slow down over the average types you will see with heavy geometry and/or avis in your view
The shift-ctrl-3 console shows the video RAM is never full (it never gets "red"

. In fact, given the same scene, the video RAM requirements are lower.
Scenario 3: Rippled Water set ON, graphics set to 64MB (Joey's suggestion)
Result: moving around in in circles or using the camera at my home results in no perceptable slow down over the average types you will see with heavy geometry and/or avis in your view. HOWEVER, the system seems to be much mroe agressive in LOD usage. Textures get detailed at a much closer radius, as does geometry. In real world usage, though, this doesn't seem effect much... (I only tested this for 20 mins though.)
Note! The shift-ctrl-3 console shows the video RAM is very often full (it often gets "red"

, in this case... but there is still no visible or audible paging to/from texture RAM.
Joey, I think you have isolated the bug!!
A) Rippled water definitely plays a factor... it may be broken, or it may use much more texture RAM than is necessary. Not sure.
B) There is something broken (?) in the video ram usage code. It works right when it is given less RAM to play with.
Hopefully, Brent and the team can use this excellent information to fix things!
In the meantime, to enjoy your Mac:
A) shut off Rippled Water and leave your graphics ram at max
or...
B) keep ON rippled water (it looks prettty...), and lower your graphics RAM one notch down as Joey described. You'll see some LOD artifacts and some textures loading more often, but so far it doesn't seem to effect much in your field of vision...
... except it speeds things up. A lot.
More testing is needed in different builds, and I will try late tonight.