It turned out to be MOBO issue. Only solution seemed to change the MOBO.
I switched to Gigabyte along with DDR3 2 GB RAM and the same Processor.
My systems working fantastic now.
btw I heard from few vendors that the Mercury P4vm800 is not a good board to go with however I used it for about 2 yrs and I believe it was time for a change.
Glad you found a solution. I concur with the sentiments regarding the Mercury mobos. Not recommended in my book, you may have had a good one to get 2 years out of it.