[squid-users] Speed reduces as squid is activated

Hi,
I have installed squid-2.4.STABLE4 on Linux 8.0,
Pentium IV, 512 MB RAM and 40 GB IDE hard drive.
I am having 128 Kbps Broadband Internet connection.
I have created separate /cache partition of 2500 MB.
User Authentication is not activated.

I am using squid as transperent proxy.

When squid is activated connection slows down
drastically. Speed reduces to 20 %. When squid is
deactivated speed is good (About 118 Kbps) I think
squid.conf and other settings are O.K.
Can not figure out what is wrong.

Requesting help.
Thanks
 
[root@adssquid root]# /usr/local/squid/sbin/squid -v
Squid Cache: Version 2.5.STABLE4
configure options: --enable-auth=ntlm,basic
--enable-ntlm-auth-helpers=SMB
--enable-basic-auth-helpers=NCSA
--enable-ntlm-fail-open --enable-arp-acl
--enable-cache-digests --enable-delay-pools

squid.conf is attached herewith

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