I don't think it's a video issue and not much of a processing power issue ether. UT doesn't seem to handle spawning brand spanking new objects very well and nail grenades spawn quite a doosy of em. I get similar reaction (short slowdown) though not half as bad from very high level mages casting magic missile (PRETTY btw).
I mention this cause when there are bots tossing grenades around even if I am not in the same area I get slowed down (I have a amd 1900+ btw).