I am not sure whether this is the correct forum to raise the issue but I have no clue regarding this problem in a week old new desktop (Biostar M4890 SE mobo, 1.8 Mhz conroe chip, 2 GB RAM, 160 GB SATA hdd running Win XP) except that this is definitely a hardware issue.
Symptoms are
1. If I try to install (any) software, suddenly it says it can't read a file in the installation package. Sometimes any native windows application like task manager, services.msc does not start up saying sorry. If I restart the machine, everything works fine till again it starts misbehaving at some point in time.
2. If reboot does not stabilize things, I do chkdsk and it corrects lot of files always and finally says no bad sector in the disk.
3. Initially the problem was with XP SP2. I formatted and installed XP SP1 and same things started all over again right from the word go.
4. Interestingly, no BSOD till date but situation is not much better though.
5. memtest (ran for 3 hours, sometimes fails in random 20 test), WDM (ran for 6 passes, failed once in stride test). I upgraded memory from 1GB to a single 2GB stick and it had no affect on anything. The symptoms were same with both the sticks. So, memory may not be at fault.
6. Seagate test (Seatools for windows) does not show any problem with the disk.
7. Orthos (Small FFT passes) blend test fails almost instantaneously (8-10 seconds).
8. smartguardian (a hardware status tool) shows (not sure what to interpret out of it, though)
cpu temp: 23C
vcore voltage: 1.16V +5 5.13V
vcc3: 3.15V +12 12.16V
vbatt: 3.31V

I have never dealt with hardware and have no clue. Any help will be greatly appreciated. Let me know what all information I should provide regarding the system.
Thanks for all the help and time....

So you have tried 2 different sets of ram and the both fail? Have you changed anything in the BIOS or is it all at stock? From your ram test failures I would tentatively guess a MB issue, but it could be as simple as a BIOS setting is a little too aggressive. Sometimes ram requires tweaking in the BIOS (it is not detected properly) before everything runs as it should.

Thanks for reply...
yeah, I tested with 2 sets of RAM and 2 different OS with same set of instabilities in both. But, 2 things I did only yesterday, which seemed to improve things a lot, at least, for last 24 hours. I changed the power settings in BIOS to 'Max Savings' instead of 'User Defined' (though, I never defined one to start with) and this time, I did not put any driver that came with mobo (other than audio). That seemed to improve stability of the system a lot but need to see it for a longer duration...