This answer is kinda stupid... and absolutely useless.
@shabaz1978 : Try to install Launcher Pro instead of your launcher. Also, you can overclock the CPU to increase the speed.
You can't expect a phone released in 2009 designed for android 1.5 (cup cake) to work lag free in 2013 with Android 2.3.7...
I still use mine as a second phone and it is slow....