I run on a Intel Core 2 Duo, 4gb ram, W7 32bit, ATI 5870...
Running 3 Wow's, 1920x1080, view distance set max on tank, min on other two, most other gfx settings on lowest including shadow..
Tried 5x boxing on it but didn't consider it good enough for what I wanted.. leveled for awhile in classic before using my old machine to run 2 of the instances. Lots of people do\did run 5x though, just depends what your willing to put up with.

It's not overly cost effective to get a 64bit os and upgrade your existing ram. You more or less need 4 cores to 5x box on a single machine well (if you like nice gfx and any lag/stuttering free)

If you can't 1x box your first pirority should be to fix that. PSU issues can be strange sometimes... the easiest option is to simply try a different one, often not that easy with spending the cash or having a friend who doesn't mind you pulling theirs out.

trying some other games or doing some benchmarks to determine if it's just wow that is an issue and when the issues arrise helps narrow it down.

Oh and as someone else said, that is a stupidly large power supply for what your running. A good quality 450 would be more than enough unless your running millions of hard disks etc. Best to check what your video cards minimum requirement is though before buying a 450w to try it!