C&B,
While your spec of PC may be old by todays standards, it will be enough to run a windows XP based system. Few things to do before you re-format and re-install windows.

Before you start, hold ctrl, alt and del keys down and find how much ram is currently in use. Do the same again after these tasks below and see if it has decreased.

1. Run Adaware 2007 and do a full scan.

2. Run AVG and make sure its going to do its most thorough check, including archives. This could take 4+ hours to run, so run it overnight.

3. Right Click on my computer and select properties and then go to advanced tab and select virtual memory settings to your 500GB hard disk and set to a minium of 1.5 times your RAM and a maximum of 3 times your RAM. By moving this memory file to your second hard disc this will speed up its operation.

4. Click start and then run and type msconfig into the box, remove anything not essential such as MSN messenger, norton ghost etc... This will not delete the program, just stop it from starting every time the PC starts up. What you may find is that HP have put a lot of apps in there such as win dvd, microsoft works etc..

5. You asked about HD diagnostic tools, go to this link and select the program that meets your drive type. http://www.tacktech.com/display.cfm?ttid=287

I appreciate others have mentioned some of this above. I would buy the extra ram as you will see benefit from it and RAM is so cheap now. I would go for 2x 1GB ddr 3200 sticks.