RAM limit: bullshit. I don't have 1.3 Gig, but I've got 512Mb, and that's enough -- according to the box. DX7? Hmmm. I've got DX9.0c.
1. That box is HL 2 singleplayer, HL 2 DM could very well be more demanding..
2. I'm not sure you understand one thing: Your card (most likely) does not support DX 9 (I'm assuming this, because you have less than a gig of ram). Even though you have downloaded and are using DX 9, your card is still only capable of DX 7 (or 8) level instructions.
3. Software releases are buggy, get used to it or get a console. Valve COULD have spent more time testing it, but that would have meant a later release. So in Valve's eyes, you release it even though a *few* people can't play it so the *majority* can have their fun.
I eat pasta!