When a system gets that unstable, I back up all my data (to CD/DVD/slave drive, etc) , reformat the drive, and re-install a fresh copy of the OS. It's really the only way, and it'll be good as new. If you've never done it before, it can be a little intimidating, but it's actually very easy nowadays.
When you say "plus one just for storage that runs no programs", are you referring to an extra hard drive? If you have more than one hard drive, you're home-free. Just move all your important files to the second drive and re-format the first one. To reformat, just stick your XP CD in the drive and boot off the CD. It'll guide you through the format/install process.
Don't forget:
Any email you have stored locally.
Web browser favorites.
And documents, movie clips, mp3s, etc you want to keep.
Save-game files if you play PC games.
All your porn.
I always look through all the folders on my main drive just to be safe.
Also, write down a list of all the programs you have installed on the system. It'll make re-installing them go much faster if you don't have to sit and think about what you're missing. Just go down the list.
Also, before you reformat, make sure you have a copy of the latest hardware drivers saved onto your second disk. If you have a gateway system, you can probably download the driver package from Gateway's site.
And once you're reformatted and back on the Internet, head stright to Windows Update and download all the critical updates.
And if it seems too daunting, call in a pro to do it for you. It'd be better in the long run to pay them to back up and reformat your system than spend more than just a little time looking for the problem.