Constant freezing snow leopard

hello, I Have a 13 inch macbook (intel core 2 duo - 2.16ghz, 2gb ram)
I constantly get a "spinning Color wheel" when im doing any type of tasks. example opening firefox, viewing a video on quicktime, opening the system prefrences etc. Im pretty sure its not the lack of ram because ive checked the activity monitor and it always shows about 700mb - 1gb free memory. ive also restored my mac to factory settings and still does the same thing. Is there anything that i can do to make my macbook stop this. is it a hardware or software problem?