Your problem might be because of that and your actually OC'ing your fsb.
What? I don't recall them saying they were overclocking their FSB.
If his CPU is 266FSB and his RAM is 400 there is simply a HUGE bottleneck in which it doesn't matter if it's 400, infact you'd be better off downclocking it to PC2100 speeds with tighter timings to optimize your system performance.
Also you could check your RAM with memtest86+ just to ensure one of the sticks isn't giving you errors thus creating that problem.
You don't really have that powerful of a setup so I really wouldn't expect much from it on the get go. Mainly this case is the CPU that's creating that huge bottleneck but that shouldn't cause any problems like the ones you are stating. That 3200+ XP will definitely be a nice upgrade from the 1800+ though.