you ever used XP? its a great OS, did'nt like it at first, but warmed to it, and i get the same fps with games in 98SE and some like quake 3 are even a few fps faster, 189fps 98SE 194fps XP with XP dets 29.4, same machine :D
98 is a fast OS yes, but primitve and when it goes, takes everything out, XP is more than decent with 256MB+ RAM and is much nicer and can be made faster when classic view etc. is switched on.
reinstalling fresh is best in hs situation imho, cause hes been having lots of issues with the install, a repair might just be a temporary ward off to the issues.
Reinstall your IDE Controller/chipset drivers, not sure what is the point you are trying to make, is the 20 Gig using the cpu more than the 60gig? might be a DMA issue, reinstall the chipset drivers.
Backup and reinstall, either you windows install is toast, or somethings fishy with the hardware, Win 2k is extremely stable, you got service pack 2 etc?
The only 1.6GHz laptops are Pentium 4 models, which i suggest you stay far from, they are dogs at that speed, look into an Athlon/Duron mobile or Pentium III powered machine if you want decent horsepower.