Can you explain what you mean by "lag" exactly? Is the game itself stuttering (low frame rates, jumpy graphics, complete freezing of the screen for several seconds at a time) or is the game still smooth but other people jump around, commands from hotkeys or clicks are slow, etc.?
If there is stuttering in the game itself, this is a hardware related issue. ATI 3000 is a series, but there as far as I can find there was never a 3000 chipset. There was 3200, 3300, 3470, etc. They're all quite mostly low end in the 3000 series, except for maybe the 3870 which is a mid-range card now. If you're using any one other than the 3870, you're probably pushing your card to the limit, which will result in a very jerky game experience with low frame rates. As an example, the 3870 is comparable to the Nvidia 9600 GT, which is what is in my girlfriend's system. She can play at almost full detail (shadows, water, and sunshafts down a notch). Usually, she doesn't have too many problems except in very player-populated areas (an auction house for example). She usually gets about 30 FPS, but in heavy areas it can drop to 10FPS or worse at times. Issues like this are directly related to your hardware.
My new computer, for example (see my specs by hovering your mouse over "Specs" to the left) never drops under 60FPS on Warcraft, even areas where she suffers horribly at the same time.
If you're not experiencing symptoms like that, and are instead experiencing the second set of issues (other people jump around, slow response from the UI or hotkeys, slow NPC response times when you click them, etc.) then you are having latency issues, which would indicate your internet connection and not your hardware.
You can check both your framerate and latency in-game by placing your cursor over the menu icon in the bottom bar (in the row between your hotkeys and bag icons). Can you post both of those? Do you experience issues when out questing or doing dungeons or in cities or raids? Or is it the same pretty much everywhere you go?
