It was the memory. I ordered a NEW 2GB DDR2, 800mhz replacement, brand: Kingston and all is well. I have installed Linux Mint 14 Nadia with MATE desktop environment. So far, all is well. Will wait until I reboot, after system update, to mark thread solved.
BTW, I love MATE. It is like a perfected version of Gnome 2. Thanks, for suggesting it @cascade9!