Running WinXP with a CDROM drive probably has something to do with it, any errors and XP causes the IDE channel to default to the PIO mode, meaning the CDRW also drops to PIO mode if its on the same IDE, and with the specs you've listed you should have the HDDs on the Primary IDE as Master and Slave, the CDRW and the CDROM on the Secondary IDE.
Until you can afford a good DVDRW all format burner, I would remove the CDROM drive from your machine and set the CDRW as Master of the Secondary IDE by itself.
The CDRW can read CDs so you really don't need the CDROM drive in the machine at all, loose it and your problems will probably just disappear.
Also you're running 1gb of RAM and if your RAM settings are too agressive it could be producing errors, you need to check that out and make sure your RAM is running error free.
You can test the RAM with Memtest86 and get it from <A HREF="http://www.bootdisk.com/utility.htm" target="_new">here</A>, almost at the bottom of the page under Memory, download the Memtest86 disk creator, activate it after the download and put the program on a floppy disk, boot from the floppy and Memtest86 will run, allow it to run for about 30min and see if it produces any errors at all, if you do get errors post what you get, if Memtest runs error free then memory is not your problem.
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