Thanks for asking!
There is a single DIMM SDRAM 128 Mb module inserted into DIMM Slot 2 (tried inserting it into slot 1 as well).
8 Mb are reserved for the video memory, 120 is available.
I've tried installing vanilla windows 98 SE and vanilla windows XP SP2. Windows 98 required installing the drivers (downloaded a bunch of them at thinkpads dot com site). Windows XP didn't require installing any drivers. Both 98 and XP crashed the same way when starting warcraft 2 (crashed, then quit to desktop and showed a part of the screen with some noisy pixels, that were representing some GUI elements, that where present in other area of the screen, but with bigger scale). Exactly the same windows 98 successfully ran exactly the same warcraft 2 when installed in the virtual box (did this to check if the distributives are ok).
I've updated the BIOS yesterday, it's now version: 1FETF1WW (3.11)
As for the IRQ conflicts I checked the system properties -> computer properties -> there's a list or IRQs, no error messages there.
Not sure I know how to check HDD health, scandisk didn't find errors though.
This problem makes me think the R31 thinkpads could not run DOS memory extenders at all.