Well pulling the 1GB stick and getting another 2GB might help.
First of all check your memory usage. You do not need a 3 GB pagefile, unless you are running 6GB memory using apps, which lets face it you are not doing on that laptop. cut it down to 256 static like you would if you had an SSD. It will prevent windows from paging. XP prefers paging and sucked at it. What you are doing wit ha 3GB pagefile is asking windows to try running off the slow *** HDD.
HDD performance is a major hindrance on laptops as already mentioned. I am running a Scorpio black 7200 RPM HDD in my 24/7 desktop right now. OMG it sucks. a 5400 RPM desktop drive is faster. (Larger platter = greater speed and lower access time) IT is getting getting upgraded soon not sure if I am going to do 2 750s in raid0 or 3 in raid5. And the 7200 rpm will go in the inspiron I am giving to my soon to be 10 year old daughter
If I dont put a cheap SSD in there.
SSD would be good. and you have 2 options here.
a) get a cheap 30 GB Used SSD gen 2, and then move your mechanical drive to the Optical port. run XP minimize pagefile and ditch the 2 GB stick and run dual channel 1 GB sticks. so hibernation file will only be 2GB instead of 3.
b) Get a better gen3 SSD and use it in your desktop when you make that jump. use your current 2.5" HDD as an external drive in the meantime.
BUT
You have to be able to enable AHCI if running a SSD so if running XP then you also need to slipstream drivers into your disk. If your laptop supports USB booting you dont even need to burn a disk. Use a USB stick to install XP from. You will need at least an 8GB flash drive though, as most systems see smaller ones as USB drives while at 8 GB or larger most boards see it as an external HDD and you can change the HDD boot order to the flash drive. (I bought 8 GB usb3 drives at $15 a pop I think last time I shopped)