I'm actually having trouble moving my character using the keyboard. Yes, it sounds absolutely silly, but bear with me. It's not that I don't know which keys to use (it's WSAD), but for some strange reason the character stops without me releasing the key. I had the Xbox 360 version of Two Worlds and know that the game is extremely badly coded in the world-streaming department, which results in mid-animation hiccups while the game is frantically trying to cram more world-data into the system memory, but my character just STOPS although I have the key pressed down. Anybody else having this problem?
I'm running an AMD Athlon 64 x2, 3GB Ram, GeForce 9600 with 512 MB vRAM, Win XP SP3 and recent drivers. The only thing odd about my system is that I use a wirelss keyboard and mouse combo, but that kind of problem doesn't happen in any other keyboard-controlled game. I can play UT3 just fine with this setup, no hiccups whatsoever.

Your system is more then enough to handle this game. So I don't know what is wrong.
As for the console version, don't compare it to the PC. The game may not be well coded but the enough power at it that it doesn't matter as much, whereas the console is highly limited on power so it can't do this.
I won't go into any technicalities as I really can't be bothered. The XBox 360 and the PC need entirely different optimizations, so what may be lacking on one may be great on another.
Basically what I am getting at in a really badly written way (I'm very tired) is that what goes for one version of a game goes for another.