Sorry for the very late reply to you all, yesterday when i tried to login to check for any replies, i couldn't . Aparently i was Permanently Banned... and i got no clue why. But today i noticed i was unbanned, yay! all that was just weird.
Anyway here are some replies:
* I had no unofficial or service packs installed at all.
* I did installed the i810 INF drivers (the ones from Phil Computer Lab)
* I just tried enabling DMA on the HDD.
* I read on these same forums about the MS Windows Security Update CD from February 2004 and installed them.
I also set my swap/virtual Memory from "Win Managed" to 128 min and 128 max. Issue seemed to have been alleviated somewhat because i used the PC for about 3 hours straight, until the issue came back again. Stuff like opening the Start Menu or moving or deleting folders became insanely frustating and i had to restart. After the reboot issue seemed to be gone again, but i only used the PC for about half an hour afterwards.
Also i tried to check the HDD on my modern system, did a through File system check and found no errors and also Crystal Disk Info sees the drive health as "Good". But i got to mention i do sort of remember having this exact same issue back in the late 90's, so this must be some 98 thing.
I previously had WinXP installed and it worked like a charm, no issues whatsoever and i could even watch YouTube videos with K-Meleon Browser (version Goanna). But since the CPU is not fast enough for some DOSBox games, i decided to try Win98. So far it's been problem after problem with Win98SE... i already reinstalled it like 5 times in less than a month. So yeah the issue is still there, it just takes longer for it to appear.
Any more suggestions are appreciated.