Squid Performance - Default Options Tweak?

Dear all:

I am installing Squid on RedHat 9 out of the Distro CDs on a Dell PowerEdge
1300 Server, Pentium III RAM 256MB. I've been trying it out for 1 week now
with the default options. It seems very slow.

Could someone guide me with some useful tips to tweak the default options of
the /etc/squid/squid.conf file for better performance?

Also, I installed BIND to act as the DNS server; but i configured it to
forward queries to my ISP DNS. Could this be the major traffic block to my
connection to ISP?

Since I started to use Squid and BIND, my ISP notified me that, my 1Mbps
leased-line connection has always been saturated.

Could it be because of Squid or DNS forwarding or a virus?

Regards,
Vidol