Too fully take advantage of optiminer's improvements you need a modern cpu that supports aes and avx2. For me on a E3-1240 i managed to double the hashrate with it. ( using 4 cores , on ubuntu 14.04 )
In your case using 2 cores yields more hash, the higher the combined hashrate the better. ( i assume you have an old dual core cpu )
Do I need both (AES and AVX2) instruction extensions for hodlminer? I'm mostly confused as to how my hash rate drops when using hodlminer on one thread. My computer supports AES but not AVX2 (only AVX1.1), is this part of it?
You can use AES or AVX2 or both or neither one... it really completely depends on what your computer can support. Usually if you try to use AES or AVX2 and your computer doesn't support it... it will be ignored. You can view your debug log and actually see those being requested and then right after that you can see whether or not the computer could support them.