Firstly, you can completely forget about defragmentation. Because the machine is running WinXP, the hard drive will be formatted using NTFS, so even if you do bother defragmenting it it will fragment again immediately.
Secondly, you should look at msconfig:
http://www.netsquirre...nfig/msconfig_xp.html
This will allow you to check for any services or applications which are set to start when the machine boots up but which may be unnecessary.
Thirdly, have a look through the installed applications and remove anything which you are certain is not being used.
Fourthly, see if it's possible to add extra RAM to the machine.