I can replicate the problem this way:

If you have a wired connection with a gateway configured to access the 
internet, just 
limit connectivity to internet and you will have a very slow system as you 
describe above. 
This happens to me when I lose connectivity with my ISP provider. There is 
network but 
don't have internet access because of modem connectivity.

Haven't found a solution yet and think that this bug should be marked
with a bold red :)

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Network settings can slowdown Ubuntu 7.10
https://bugs.launchpad.net/bugs/174989
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