Squid makes Internet slow

The server looks like old piece of hardware. For HTTP proxy it is necessary to tune your setup this way:

• Make sure DNS resolves fast on your squid system (try "host www.google.com", make sure you have fast DNS servers - you can setup Google fast DNS: 8.8.8.8 and 8.8.4.4)
• Calculate how much memory to use for caching: http://wiki.squid-cache.org/SquidFaq/SquidMemory
• Make sure your server is not swapping.
• Put your disk cache onto separate partition dedicated only to the disk cache and nothing else (this is important).
• Choose proper filesystem for the cache (I recommend ext4 with dir_index option!)
• Tune your disk cache setting: http://www.squid-cache.org/Doc/config/cache_dir/ (very important - depends on the size and expected files there - are they big or small?)
• Monitor your server and make tunings over time (you can't achieve perfect setup the first day - you need to revisit your setting after while when cache fills up).

For completeness...

Your hardware is more than ten years old; you should expect it to perform like hardware of ten years ago! While you should definitely tune your squid server, there's not much that will help when it's running on that ancient monstrosity, except to use more current hardware.