Oy. Where to start?
First things first, and I'm sorry to break this to you Blackmoon but yes, while that spec isn't bad, it's not as good as it could be either. You can still run XP without any real problems but you will find that even the smallest bit of spyware is going to noticebly slow you down.
What's been said already about checking for spyware and viruses is good advice, and I'd sugest that's your first port of call. If it works, and you save yourself the pain of a Windows reinstall then so much the better. One thing I should mention, a lot of places now do 'professional' installations for reasonable amounts of money these days. You might want to consider checking in with them to see if the money they're charging is worth less than the cost of the time it'll take for you to do it yourself. If not, then read on.
Before you do anything else, make sure you've got all the files you want to keep backed up. If you've got a CD (or DVD) writer then make use of it, if not it's time to break out the floppy disks. When doing a reinstall of windows assume you WILL loose everything currently stored on your hard disk. Paranoia is always the best policy. Make sure you write down all the settings for your internet connection, it's amazing how many people forget this step and get stung later on.
Next, you need to make sure you know exactly what hardware is in your machine and that you have up-to-date (and working) software drivers for everything.While Windows XP is better than some older Microsoft operating systems with regards its built in drivers, it's still pretty damn poor. Hopefully you'll have a handfull of driver disks that came with your machine which will include XP drivers. If not, you've got some work to do.
If you go to Control Panel, System, Hardware, Device Manager you should get a list of everything in your PC. Areas to pay particular attention to are “Sound, Video and Games controllers”, “Network Adaptor” and “Display Adaptor”. If at all possible find out what motherboard is in the machine as there are usually special software drivers for certain components on the motherboard which can make a hell of a difference to your PC's speed. Of course, if the machine is a branded machine (Dell, HP, Gateway etc) you can just look in the support section on their web site for your particular model and they should have all the relevant drivers waiting for you. Download everything that's listed and, while you're about it, try installing the drivers. That way you know if it's the right one for your setup before going through the headache of re-installing the machine.
Make sure you've got all the installation disks for any applications or games that you're going to want to use after the reinstall. Anything that's currently installed will be deleated during the reinstall so you WILL need these disks.
Next you're going to need a copy of Windows. As OEM versions were mentioned earlier I think it worth expanding on this. An OEM version of any Microsoft product is exactly the same as the one you get in the retail box, only without the pretty packaging. They are supposed to be used by system builders who buy in bulk (though not in enough bulk to get onto Microsofts bulk discount programs) and are only supposed to be sold with some suitable hardware. However, as the definition of “Suitable Hardware” is pretty much anything from a $2 mouse up this isn't a huge problem. Buying OEM isn't usually a major problem, but do try and make sure you go to a reputable dealer. As Microsoft requires all copies of Windows XP to be 'activated' you may run into problems if the particular CD Key provided with your OEM copy has already been used. The chances of getting a dodgy key are pretty small, but it does exist. It's up to you whether that small risk is worth the cost saving over the retail version. Oh, one other thing, it's worth checking the 'bargain' section of your local PC chain store. I picked up a version of XP Home with a damaged box for less than an OEM version would have cost me.
There are also two versions of Windows XP Home and two versions of XP Professional – Upgrade and Full. These are both identical in terms of features but the upgrade version will require you to put a disk for a “qualifying product” into the machine during installation. From what I remember a “qualifying product” is Windows 98, 98SE, NT, 2000 or ME. It's also worth seeing if there's any way you, your family or any siblings qualify for the Microsoft student programe. You'd be surprised just how lax the requirements are and you can save a fortune buying your software this way.
(Note, the next step asumes you are NOT running the Windows Installer from your existing XP installation.)
Now it's time to get rid of your existing Windows installation. This step is going to be awkward as it requires changing a setting in what's called the BIOS. This, to over-simplify things, is a chip on your motherboard which stores all the really important settings like how many hard drives you have connected, what speed the processor should run at and a lot more. You usually get to it by hitting the Delete key before Windows starts to load. Watch the monitor when you turn on the PC and you should see a message, probably at the bottom of the screen, which says something like “Press Delete key to access BIOS” or “Press F8 to change settings”. Sorry I can't be more specific. Once you're in the BIOS look through the menus until you find settings relating to “Boot Order” (possibly Boot Device Order). This should be set as the floopy drive as the first device, then the hard drive, then the CD. Change this so it reads floopy, CD, hard drive. Open the CD, put the Windows disk in, close the drive, save your settings and exit from the BIOS. The PC will reboot and, hopefully, either boot from the CD or at least give you the option to do so (you should say yes to this option of course).
Now you should have the Windows Installer screen in front of you. Follow the prompts untilyou reach a screen asking you to select an installation partition. This should list all the drives on your PC in the bottom half of the screen. Make sure the selection bar is on your C drive (or whatever disk your current version of Windows is installed on) and delete this partition. This will delete anything on that drive. You know have an expensive paper weight instead of a working PC, congratulations.
Assuming you don't actually want an expensive paper weight, create a new partition using all the free space you have. This will recreate your drive as it was before you removed the old install of Windows but without any of the programs or data. Format the partition using NTFS. The machine will now whirr a lot, you might want to break for a coffee or ten.Once your coffee break is over, come back and start working through the installation process. This is surprisingly user friendly and doesn't tend to screw up much these days, so it shouldn't be too much trouble. After anything from ten minute to an hour (or possibly more) you should have a working XP system again. Horray!
If it all goes titsup.com, don't panic. Also, don't try and recover the installation, it won't be worth it, just start over. If it screws up a second time, then you can start panicking.
Next, get your drivers installed. Start with the motherboard drivers, then the ones for your graphics card and, if necessary, the network card. That's all you need to get going and it's not worth doing any fine tuning at this point. Next, get your internet access configured and make a beeline for the “Windows Update” link in your start menu. The last clean install I did about a month ago needed well over 100Mb of patches, including Service Pack 2, so this might take a while.
Once you're finsihed with all those updates do a quick systems check. Make sure everything seems to be working as you want it too and that there's nothing obviously wrong. Then you've just got to install any other drivers you may have and reinstall all your applications. Oh, and put all the data you previously backed up onto the system.
While you're about it, I strongly recommend you install these two applications.
Firefox:
http://www.mozilla.org/products/firefox/ - alernative web browser
Thunderbird -
http://www.mozilla.org/products/thunderbird/ - alternative e-mail client.
Both of these programs have a proven track record for stability and will make it a LOT easier to avoid the various nasty tricks that can be sent your way through IE or Outlook.
That just about covers the basics I think, for more detailed information have a look through google. Here's a couple of sites to get you started.
http://www.winsupersite.com/showcase/windowsxp_sg_clean.asp
http://www.pcstats.com/articleview.cfm?articleID=1435
http://www.windowsreinstall.com/
Hope at least some of this helps you out,
Steve