I've got some of the latest hardware, a core i2500k sandybridge and a 6850. That's not even enough to cut it for this game. If I had to take a blind stab at it I'd say the lag isn't a graphic issue, but rather the result of a loop breaking.
Your game is a good parody, but honestly, when it comes to law you don't know what the hell you're talking about. It doesn't matter where you found the images or what license they were redistributed under. As the author it's your soul responsibility to check with Blizzard Entertainment to see what license the artwork falls under. If the artwork you've used doesn't allow you to redistribute it for commercial gain you're committing an illegal act, period. BTW, despite being tossed around a lot in TV shows fair use is a bullshit term.
Dude, half of these bosses are ripped directly from Tyrian. It was the first computer game I've ever played. Back in the day Acer shipped it's computers with this sub-desktop thing with a ton of game demo's. That game had everything including nose jihad.
 "Not Your War"){kind=icon}
 "GrindQuest Beta"){kind=icon}
 "Castaway"){kind=icon}
 "Hardball Frenzy"){kind=icon}
 "Vacation Mogul"){kind=icon}
 "Ghost Guidance"){kind=icon}
 "Starmageddon"){kind=icon}
 "Factory Balls 3"){kind=icon}
 "Elona Shooter"){kind=icon}