ShaolinFlame - Don't go to BestBuy/Futureshop. Check Dell.ca or Lenovo.com, they both have plenty of notebooks that fill out your checklist. XP is an option most places from what I have seen (but not BB/FS - there you get what it has got). More memory is always nice, but 1GB should be OK for XP, unless you are doing anything hardcore. For processor, make sure you stick to a Core 2 Duo processor and it will kick the crap out of any p4 and use MUCH less battery.
You may also want to see if there is anything on an Apple laptop, but they are a bit pricier.
JohnnyFlame, I doubt there is anything cheap you could do to make a 5+ year old computer work on a par with a brand new system. I would suggest add memory, but the memory used is probably expensive as hell since it won't be made in quantity anymore. Some older games may be alright - the whole Unreal tournament seems to run well on anything. Generally speaking, gaming is the cutting edge top end of the computer spectrum. Console gaming may be the way to go, if they can get along.
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