Have you tried a few other distros / liveCDs to see if it's consistent among distros? If you want to rule out transmission as the sole reason for your issues. Because it could be lots of things, or lots of things in combination.

I just upgraded to Debian Lenny after running I guess etch for a year or more. And a few of my performance woes with mplayer and mkv files went away. And that's with running a distro supplied kernel and not the custom job I normally run.

conky or gkrellm might help ID some bottleneck. If you're even interested in finding a solution, versus just complaining about transmission and/or your torrent source of ill repute.