Hey, I still have a serial mouse!

Not to assume anything, have you run the lates virus/worm scanners? have you run the lates spyware killers? Have you checked the scheduler to see if it running something at that time? Does it freeze the same time each day or after the same about of up-time? Old to you might be newer that the kit I built for myself in 1999 (Yes, I expect to dragged, kicking and screaming into the 21st century -- my previous maching was an AMIGA! and I still have religious feelings about it).
more info about the machine would be good

Start/programs/accessories/system tools/system information will give you this:
Microsoft Windows 98 4.10.2222 A
Upgrade using CD /T:C:\WININST0.400 /SrcDir=F:\WIN98 /IZ /IS /IQ /IT /II /NR /II /C /U:xxxxxxxxxxxxxxxxx
IE 5 6.0.2800.1106
Uptime: 0:01:02:14
Normal mode
On "XXXXX" as "XXXX"

GenuineIntel Intel(r) Celeron(tm) Processor Intel MMX(TM) Technology
320MB RAM
63% system resources free
Windows-managed swap file on drive D (2566MB free)
Available space on drive C: 4377MB of 6169MB (FAT32)
Available space on drive D: 2566MB of 16425MB (FAT32)

Then, in that same window, choose tools /system configuration utility then choose the startup tab and check out what runs at startup. If anything looks suspicious, turn one item off and reboot -- repeat until the problem goes away. Document each step so that you can undo what you did.

GrimJack

I did run virus scan, as well as spyware detectors --> Nada
I also looked in the scheduled programs, and there were 5 things there: Defrag, scandisk, critical update (Windows), Symantic and some other cleaning utility. I deleted all of those because they were programmed to run from 8am starting 2 years ago, 24/7.

I still have a lot to look into