I think there still is a way how ÿou can play LFS on the rig you mentioned.
First, look if there are any newer drivers for your graphics available. AFAIK LFS needs DX7 fully compilant GFX an DRIVERS!!! to launch.
I recommend you to get back on Win98. It is not stable, it is not safe, but it is fast. Any NT-based Windows checks all the commands sent to drivers of important devices and that slows weaker PC down as hell.
But do this only when there are available newer GFX drivers for Win98. LFS runs under WinXP on your machine just because their drivers awareness of your onboard GFX.
And if you really want to play LFS on that PC more seriously, then getting some DX8.1 fully compilant GFX(can be crappy GF3/GF4 Titanium or some ooold AGP radeon) is a REALLY good idea. Hardware Vertex Shaders decreases CPU loadment a lot.