Final Cut Studio - Adding Transitions

First off, I'm really new to Final Cut Pro... but very experienced in most other pro level Photo and Vector software. I'm following a video tutorial to learn the software, but I keep getting the "Dropped Frames" Error when I add effects. The way I'm doing it right now is I drag the slider to the point in the clip I want to add a transition and click the "Add Edit" option. From there I go to the browser and add the "Video Transition" "Dissolve". It shows up in the time line but when I go to play it and see my changes in the "Canvas" window I get the "Dropped Frames" error. I read the help file on this problem here:
http://support.apple.com/kb/TS1165
I don't believe any of these things apply to me, and the options I could change did nothing to resolve the problem. I'm using a 13" MacBook Pro with the standard 2GB of RAM, 2.26GHz Core2Duo and Snow Leopard 10.6.2, 720P video at 30fps.
The effect isn't even playing in the "Canvas" but I see it in the timeline. It's just not showing any effect at all. I could really use some help here... I was under the impression the 13" MacBook Pro can handle this kind of editing. Again I'm not doing anything major, just a video with some minor transitions.

Sorry Studio X,
I may not be an experienced Final Cut user, but I have done a fair share of video editing. Suggesting dissolve effects are very CPU intensive is just not true. I can do them in other software with 0 issues. I appreciate your help, but if Final Cut is unable to do something I've had zero issues doing in Premiere and Avid... that is something to be surprised about.
However, perhaps it's the video format I'm trying to edit (h264) which would be a much more reasonable explanation. I'm not entirely convinced that using an External Firewire drive is the only solution to this issue, and judging by other responses for my purposes no one else is suggesting that.

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i have upgraded my 2gb to 4gb you will need to buy 2x 2gb sodimm sticks i found mine on ebay quite cheap and a decent make aswell. it does help with booting up and FCP running.
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This isn't the thread in post in.
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Jason Williams G5 wrote:
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Final Cut Studio - Adding Transitions

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