Deadly engine lag on Piety fight

My HC character was killed by a few seconds engine lag when fighting Piety (Cruel difficulty).

This is what happened:
I soloed my way down to Piety and decided to create a public game to team with other players. Waited a bit in town and when some player joined I entered back the Piety room. It all started fine and there was no lag for several seconds. Then suddenly everything stopped on my screen. What I noticed it was lots of skills spammed at the same time like Freezing Pulse, Piety's Ice Spears, etc. I tried to alt+f4 but then everything returned to normal. My ball was almost empty so I quickly hit the pots and rushed towards Piety. Then she changed into the other form (that one chasing players) and the screen frozen again for a few seconds. I tried to exit again but the game didn't react to the key shortcut. The next graphic update displayed was the window informing me that my char got killed.

The game sounds were not frozen and I could hear them during freeze all the time.

So much lag never happened to me before and the game was usually running smooth at 50 - 75fps (at least for solo/duo playing). However I often notice that when certain skills are used for the first time the game freezes for a short moment - an example is Summon Skeleton or Molten shell. These freezes are not a big problem since they last below 1 second and only once (I assume the engine must load them into memory first).

Tech specs:
Video card: GeForce GTS250
Screen resolution: 1280x1024
System: Windows XP SP3
Memory: 4GB RAM (no virtual memory enabled)
CPU: Intel Core i3-2125 @ 3.30 GHz

I also heard that /dnd command may result in similar freezes and can be used to PK players.

I can only add what I perceive as a kind of first time skill use lag.
To me it looks as if areas are loaded but the engine does not pre-load the skill effects that we have currently hotbared, and most likey not the unique skills of bosses either.
It's most noticeble to me when using skeletons in a new zone for the first time.
In that case it's more than just a simple skill VFX though since new creatures are pulled into the game and memory.
The lag to me looks like slower performing / older PCs are having trouble to read data from packages in real time.
Sadly for boss skills it can be deadly (1 second is harsh, 5 seconds or more are deadly)