How to optimize the sql query

As I haven't further information, I just would suggest a first change of your where clause. They should be moved to a subquery as you left join those columns.

SELECT *
FROM(
    SELECT *,
    Row_number() OVER(
    ORDER BY datecreated DESC) AS rownum
    FROM
    (SELECT DISTINCT c.itemid,
    (CASE WHEN (Isnull(c.password, '') <> '') THEN 1 ELSE 0 END) AS password,
    c.title,
    c.encoderid,
    c.type,
    (CASE WHEN c.author = 'education' THEN 'Discovery' ELSE c.type END) AS TYPE,
    c.publisher,
    c.description,
    c.author,
    c.duration,
    c.copyright,
    c.rating,
    c.userid,
    Stuff(
        (
            SELECT DISTINCT ' ' + NAME AS [text()]
            FROM firsttable SUB
            LEFT JOIN secondtable AS rgc ON thirdtable = rgc.id
            WHERE SUB.itemid = c.itemid
            FOR xml path('')
        ), 1, 1, ''
    ) AS [Sub_Categories]
    FROM (
        SELECT cg.itemid
        FROM fourthtable as cg
        WHERE cg.ownerid IN (294777,228649, 188464)
    ) AS cg
    LEFT JOIN (
        SELECT DISTINCT c.itemid, c.type, c.author, c.title, c.encoderid, c.type, c.publisher, c.description, c.author, c.duration, c.copyright, c.rating,c.userid
        FROM item as c
        WHERE Isnull(c.title, '') <> ''
        AND c.active = '1'
        AND c.systemid = '20'
    ) AS c 
        ON c.itemid = cg.itemid
    ) AS a
) AS b
WHERE rownum BETWEEN 1 AND 32
ORDER BY datecreated DESC

But not quite sure if everything is connected right away, your missing some aliases which makes it hard for me to get through your query. But I thing you'll get my idea. :-)

With this little information it's impossible to give any specific ideas, but the normal general things apply:

1. Turn on statistics io and check what's causing most of the logical I/O and try to solve that
2. Look at the actual plan and check if there's something that doesn't look ok, for example:
   • Clustered index / table scans (new index could solve this)
   • Key lookups with a huge amount of rows (adding more columns to index could solve this, either as normal or included fields)
   • Spools (new index could solve this)
   • Big difference between estimated and actual number of rows (10x, 100x and so on)

To give any better hints you should really include the actual plan, table / index structure at least on the essential parts and tell what is too much time (seconds, minutes, hours?)