Last week my computer slowed down dramatically.
-Tranfering 4.3GB of file took over 25 minutes
-HD tune showed 2.2mb/s read and write speed. Before the major slow down, hd-tune is getting 50mb/s+ from each of my two maxtor harddrives
-DVD-RW can only read and write at 1x
-Every program lags
-took 20 minutes boot live cd ubuntu 7.04 from dvd-rw which is very unusual. It used to load under 3 minutes.

These were the problems which i found out after the slow down
-Only the 1st ATA 133 channel works (supporting only 2 drives at 2.2mb/s~ bandwidth). The 2nd channel does not detect anything at all. It stopped working all of a sudden.
-integrated graphic card shows up image, but the image has pink colour as if the D-sub connecton is broken. But when i switched to a discret graphic card, everything was ok.
-The system sometimes dosn't detect ram on the 2nd bank. So sometimes i would only have 512mb of ram instead of the usual 1GB of ram.

Is it normal for a chipset to fail abruptly like this without any warning? Is there any way to fix this issue other than buying a new motherboard?

What motherboard do you have? The IDE channel usually goes to the southbridge, while ram is handled by the northbridge. (seeing as the SB sends its data to the northbridge, I'm assuming its the northbridge thats toast, or you have a single chip motherboard.) Honestly, I've never had a motherboard fail in this way, I've never experienced chipset death. Check your NB/SB and make sure there isn't a fan that died. Try loading the bios defaults. Just for the hell of it, scan the computer for crapware just incase thats the cause. If I were you however, I'd start looking for a new motherboard.

I have SIS northbridge and southbridge. I think both Northbridge and southbridge are acting weird. There are no fans on the chipsets. They're not overheating. I've already cleared bios a few times to make sure it's not incorrect setting.

I wouldn't start looking for a motherboard for this machine. The CPU is soldered to the motherboard thus i cannot take it off and reuse it.