Latest Windows XP updates have become more memory intensive and can cause your computer to lag. Also, almost every program I install seems to want to put a portion of itself running in my RAM - taking up memory and slowing things down.
To speed things up, 1st back up all your data and do a clean install from your Windows or restoration disc. After that, only install the programs you absolutely need. Also, watch your taskbar (the section of icons next to your clock at the bottom right of your screen). Programs such as RealPlayer and QuickTime need to be configured to NOT run at startup. To ensure maximum system speed, only essential programs should be down there, such as your antivirus and firewall.
Also, make sure you get all the Windows Updates installed ASAP - your computer is prone to attack otherwise. As early as possible, install an anti-virus program and firewall (NOT the Windows firewall, ZoneAlarm is okay if you don't already have something else).
After you've gotten everything reinstalled, restored, and basically back to how it was before you wiped the drive, if it's still slow you should consider max'ing out your RAM. Most slow computers (ESPECIALLY from 3 years ago) are either plagued by too many nonessential programs installed and running in the background, or too little RAM. I recommend no less than 1GB of RAM.
A laptop from 3 years ago should not be running terribly slow, unless it's a RAM issue or too much junk running at the same time. I don't recommend buying a new laptop, unless you bought some junky bare-bones model from Wal-Mart for $300. If that's the case, go Dell or Gateway (I've had great luck with Gateway).
I definitely don't recommend installing Vista yet, it's even more demanding of your system resources than XP, and Micro$oft is still working on its driver compatibility - that means some things might not work after installation (your CD-ROM drive, your wireless card, etc.).
Hope this helps!