Mozilla Firebird is a light Version of Mozilla that is just a browser, no mail client, etc. Download it, try it out, you may or may not like it.
XFree86 is the graphical server. It is what is responsible for actually drawing all the pictures on screen. You have the current version. They do not have releases very often. Its 4.3.0 by the way.
Redhat comes with KDE 3.1 and GNOME 2.2. There are bugfix releases out for both of them, so you can upgrade, but its no that important.
You wont notice too much difference between the two at first glance, because Redhat gave them both the same theme (bluecurve). Which one is better? Its opinion. Personally, I like GNOME because I like its defaults and look. But KDE has a lot more settings and options, so you may be able to tweak it better.
Try them both, and see which one you like.
You may also be interested in XFCE4. Its another Desktop Environment, and it looks a lot like GNOME, but its much lighter and IMO more stable. xfce.org