If your running windows vista or 7 if you right click the ffxiv shortcut, click on the compatability tab, then check the box next to "disable desktop composition" it will disable all aero features (which can use up grahics resources) and it should virtually eliminate lag, and allow you to turn up the settings.
For people who care about aero, your aero features get restored when you log out of the game.
This method worked for me and im on medium - high settings on my 512MB laptop graphics card, rather than low settings
