256mb is low for using XP
it really does slow the pc down let alone trying to video edit...
as XP alone takes up some ram..
min i would use is 512mb or if poss 1gb..
NTFS is better filing system to FAT32
but you can still run it as fat32 if u like.
though being on XP it would proberly run a bit better on ntfs..
but to swap it over u need to format C.. reinstall etc

faik
have u tried swapping both IDE leads around unless you
have a spare 80 wire ide lead there...
to see if the problem ur having moves to the C drive instead of D.. ?
does ur pc see the maxtor as a 300gb drive. or ???