I just got a PODxt at the weekend, so I'm just getting started with that piece of hardware. As far as I know the POD 2 and XT are "basically" the same...

First thing to do is go to Line6.com and download all of the updates and drivers via USB into your POD. Then, if I'm right, you should be able to play into your pc directly via the USB.

The other scenario is via the line out from the POD and straight into your pc's soundcard... If you are suffering latency issues with something that basic then you need a new pc... I got a friend to custom build me a pc specifially for music: 3GB Ram, Pentium 4 processer, 2x150GB fast hard drives and Windows XP Pro with no added software (office utilities etc). I use a Tascam US428 controller to do all recording direct from guitar. It acts as a superfast soundcard that interfaces with CUbase SX or whatever sequencer you use.

Anyway, I don't advise adding anymore to your pc if you are serious about making music for the next few years... the problem with getting new RAM and cards is that the mother board can only handle so much. Its like having a Porche with a 1 litre engine...

What setup do you have on your computer? OS, RAM, Processer, Drive space etc?
If its a reasonable system, you might be able to get away with defragmenting the drive, then cleaning all unnecessary files from the system, then downloading all of the critical windows updates from microsoft.com
Try that before you buy anything else. I don't know anything about the type of card you have now... I had a Soundblaster Audigy which was fine for direct input recording on a slow pc, never had any issues with latency...

Maybe someone else in the forum will know a bit more about the tech end of things. Good luck!