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Right click on My Computer / Select Properties / Advanced / Performance Settings / Advanced tab

Processor scheduling: Specifies how CPU time is divided between running processes.
  - Programs - more CPU time allocated to the foreground Application (Browsers, Games, Mail, Etc) - Recommended unless File / Network Server
  - Background services - divides CPU time equally between all running processes.

Memory usage:
  - System cache - On PCs with 256MBs or more installed, this should result in best system performance
  - Programs -  Result in best overall system performance if under 255 MBs of RAM

Click Ok & restart your PC for the changes to take effect.

Code 1 - This device is not configured correctly.

- Recommended resolution - This device has no drivers installed or is incorrectly configured. Update the driver(s) by clicking Update Driver. This starts the Hardware Update wizard. If updating the driver does not work, see your hardware documentation for more information.

Code 3 - The driver for this device might be corrupted, or your system may be running low on memory or other resources.

- Recommended resolution - If the driver is corrupted, uninstall the driver and scan for new hardware to install the driver again. To scan for new hardware, click the Action menu in Device Manager, and then select Scan for hardware changes. 
If the computer has insufficient memory to run the device, you can close some applications to make memory available. To check memory and system resources, right click My Computer, click Properties, click the Advanced tab, and then click Settings in Performance field. 

MS KB Article 819101 has more info:
 
In Windows Explorer, when you right-click a file or folder, you may experience any of the following behavior:
Any file copy operation that is occurring at that time may appear to stop responding.
Network connection speed may significantly decrease.
All streaming input/output operations such as listening to music on Windows Media Player may become distorted.
When you right-click a file or folder in Windows Explorer, the CPU usage goes to 100 percent while the shortcut menu is displayed. It returns to the correct level when the shortcut menu is closed.
To work around this behavior, use either of the following methods:

Method 1

Turn off the transition effects for menus and ToolTips.
To do this, follow these steps:
To turn off the transition effects in Windows XP do the following:
Click Start, and then click Control Panel.
In Control Panel, double-click Display.
In the Display Properties dialog box, click the Appearance tab.
On the Appearance tab, click Effects.
In the Effects dialog box, click to clear the Use the following transition effect for menus and tool tips check box, and then click OK two times.

Starting Windows XP in Safe Mode
If your computer is off, switch it on to boot up.
If your computer is on, close all open programs. Go to Start and select Shutdown, click on Restart and OK.
While the screen is black with white writing press the F8 key.
Use the arrow keys to move to and highlight Safe Mode, and then press Enter. Allow the machine to finish booting.

Notes About Starting Windows XP in Safe Mode
In Safe Mode, as with other Operating Systems, only basic files and drivers will be loaded, such as, mouse, monitor, keyboard, mass storage, base video, default system services. Safe Mode helps you diagnose problems. If the problem that brought you to this point is not manifest when you start Safe Mode, then you can be sure that the default settings and device drivers that were loaded to create the Safe Mode, are not responsible. Equally, if a newly installed device or driver is causing the problem, you can use Safe Mode to uninstall it or reverse the change.