Hi there LinuxNoober!
I've Diablo 2 and LOD up an running in a much weaker system then yours, with the same Cedega and Suse version:
p4 - 2GHZ
256 Ram
Nvidia Geforce 4 MX (lol) 440
The only thing I can see on your PC that could turn into a problem, is ATI's card. It seems (at least I heard) that ATI drivers for Linux ain't good. Not sure if you are using ATI's official drivers or not, but try them, and try also different versions to see which one works for you.
Also, try Diablo 2 first without the LOD expansion. It worked for me in the past, but not LOD. One day, it simply started working...
And beware if your system really stalls as you say, Diablo 2/LOD really takes a long time to work after it start reading the CD
.
Good luck mate!