First off, set your min and max sizes to the same value: 1024. Anything else, and you're asking for trouble, in my book.
If you have a second hard drive, put your virtual memory space on it. IOW, virtual memory should not be on drive C: if you can avoid it. That just improves performance overall.
I'm more than a wee bit impressed that the only thing running at startup in msconfig is nprotect. On my Win98SE system, which I like to think is fairly lean, I have about two dozen applications that run at startup, including virus protection, systray, task monitor, video driver stuff, and more. Is there nothing else showing? Checked or unchecked?
As for DX8, there were problems with DX8.0A when it came out, and back then, the board wisdom was to avoid DX8. Those issues were taken care of with a later version of DX8, and DX9 has been bug free for me. What I would suggest, if you're nervous about it, is making a fresh start disk so that if it goes all nasty, you can reboot and put it back the way it was. If you're completely paranoid, install Win98 on a second hard drive, put DX9 and the game on there, and boot from that one to see how it works. If it doesn't, you can switch back to the original hard drive and we can regroup from there.
I will mention that I've noticed a strange behavior on my system occasionally... the game appears to freeze. However, I can still hear movement sounds (footsteps and so on), and I've found that the game will actually come back to life in a few seconds (okay, tens of seconds). I believe a defrag cleaned up that problem; a full defrag, that is, with everything possible being moved.
Let's try that and see what happens.
