There are plenty of reasons to upgrade the os to one such as xp or 2k pro. Not only is win 98 no longer supported by microsoft, but an operating system such as xp or 2k will give him greater security via the ntfs file system, real user accounts, auditing, etc.
Having more than one firewall on the pc is kind of silly. I'd focus on learning to configure one of them properly. One of my favorites is tiny personal firewall since it is fairly easy to configure and also has tripwire like functionality to get a hash of important operating system files to audit for changes.
How do you know your computer is being hacked?
