It turns out that for my BWP install even one bag is too many. I tried reducing items, removing individual bags, all the standard things one would do to test. Even if I have one empty bag in my inventory I experience stuttering, albeit minimal, still perceivable. Filling the bag or adding more makes situation quickly worse.
Thought this might help someone else.
EDIT: I was not very clear in my original post, however, if I remove all bags the game works perfectly. So I will go bagless.
Edited by greymark, 22 December 2010 - 04:39 PM.