Fonts causing major system lag

But would that explain why it didn't lag in 10.5, but does in 10.6?

Snow Leopard was essentially a complete rewrite of the OS as 64 bit. This includes the type engine, which still has some glitches. So SL may have problems handling the font that Leopard had no apparent trouble with.

and would RAM errors cause the processor to be running at full?

Yes. Just as a corrupt application can, a bad font (fonts are actually small programs) can cause buffer overflows into RAM that is not assigned to it.

If you have performance issues when just that one font is active, and everything returns to normal when you turn it off, then the font is most definitely bad and shouldn't be used.

Edit: Is this same font?

http://www.dafont.com/city-burn.font

If so, that is one BAD font. About a billion points, many overlapping. Ditch it.

Just for fun, I tried it in Snow Leopard. Using the font in Photoshop didn't cause any outlandish CPU usage. Remained at about 97% idle.

You may just want to try downloading it again. Just be aware that like the vast majority of free fonts, they are built by people who know darn little about how to create one. Personally, I won't use a free font unless it's something I can't get anywhere else that looks similar enough in a well made commercial font.

would the format make a difference like windows truetype vs mac truetype? what about opentype or postscript?

Not sure since the font would still contain all of the same points. Converting it to OpenType though might help with the CPU usage since SL is much more geared to that format than the older styles.

Nope. Neither location nor what font manager you use won't make any difference how the font behaves. Active is active. I am confused though why it's spiking your CPU usage when the same font from the same web site doesn't do that to me in Leopard or Snow Leopard.

It might be that your font cache files are hosed. Download and run OnyX. Make sure to grad the Snow Leopard version. Click on the Cleaning heading, then the Fonts tab. Check "System and Users" at minimum. Check anything else that applies and click Execute. Make sure to let the system restart when it tells you.

Most likely the font is damaged and is causing all kinds of errors in RAM. The only thing you can do is find a clean copy to replace the one you have.

Kind of what I expected, but can't really think of another reason why that font is causing such major CPU cycling on your end.