I'm not sure what the sim files are, there is a sim version of EMC2 that doesn't need a real time OS, but that is not included with the CD package.
But, the usual cause of the system locking up is having the BASE_THREAD setting in the xxx.ini file too low. This requires the CPU to be interrupted so often it can't get anything done. So, you might try increasing that value until the system is stable. 700 MHz is certainly a workable CPU, but is pretty slow for software generated steps. I use a 600 MHz CPU just fine with external hardware assist, but in that case there is no BASE_THREAD at all, and the SERVO_THREAD is 1,000,000 ns
(1 ms). I think you will have to increase BASE_THREAD significantly to run the step generator on a 700 MHz machine.
The system monitor only sees the NON real time Linux activity, it never sees what is going on in the real time environment.
Swap file activity would indicate you have run out of physical memory, shouldn't be much of a problem in most cases.