FAT 32 is a file system - basically the way your files
are stored on the hard drive. It should have no impact on
graphics or your internet experience. In fact, FAT 32
could save space and increase efficiency in most cases.
The problem should lie elsewhere.

Open My Computer, right click the C: drive, properties and the file
system is displayed on the general tab.  As Enoch says, it is unrelated
to your speed problem.

The processor is probably 120 MHz and you have 32 mb of ram.  This is
the bare minimum to adequately run W98--that's why the laptop is slow.
You are currently using an analog modem so your internet browsing will
also be slow.

You might be able to speed up the boot by cutting back on the programs
running in the background:

To cut back on the number of programs starting at boot, check the
programs themselves for an option not to load.  You might have to double
click an icon in the tray (others might require a right click) and then
look for preferences or options.   If you cannot find an option, look
for the program in the following start up points and remove the
reference to it:

Start up folder on the start menu, the load= and run= lines in the
win.ini and these registry run keys (use regedit.exe):

1. HKEY_LOCAL_MACHINE\Software\Microsoft\Windows\CurrentVersion\Run

2. HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Run

3. HKEY_LOCAL_MACHINE\Software\Microsoft\Windows\CurrentVersion\RunOnce

4. HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\RunOnce

5. HKEY_LOCAL_MACHINE\Software\Microsoft\Windows\CurrentVersion\
RunServices

6. HKEY_LOCAL_MACHINE\Software\Microsoft\Windows\CurrentVersion\
RunServicesOnce

7. HKEY_LOCAL_MACHINE\Software\Microsoft\Windows\CurrentVersion\
RunOnce\Setup

There is a freeware program that makes this process a lot easier to
manage: Startup Manager,
http://home.ptd.net/~don5408/toolbox/startupcpl/

You can use msconfig.exe, startup tab, to disable programs; however, by
doing so, you may lessen its value as a troubleshooting tool.  There
might be some double entries in msconfig--leave those for your AntiVirus
program and load power profile alone as they are required.  If you
disable an entry in msconfig or remove it from the start up point and
the program loads again after a reboot, that is an indication that you
missed an option on the program itself.  If you don't know what an entry
is, check here:  http://www.pacs-portal.co.uk/startup_index.htm

.  Looks like the previous owner user

fat32 is the "normal" way to do a win98 install

what you really should try to do is add more ram