This as you can imagine has been asked many times, installing XP will slow it up as its a bit of a hog regarding resources but it is better than 98 more stable and much better with video, pictures and music if you're really into photos you'd like it once you got used to it, a new video card would be reasonable providing you have AGP and a larger hard drive is also a possability.
You don't mention what sort of games your son plays. As long as its not some of the newer graphics intensive games then upgrading is a reasonable choice. 80 gig hard drive about £40, 120 gig perhaps £10 more, better graphics card than you already have anything from £50 upwards. Seen a good deal on a card that was £120 a year ago click here=