That xml problem would be resolved by a deinstall/reinstall, but thats not the main issue.
The hardware is considerably below spec.
You have a VIA on-board graphics chip setup, the game does not support on-board integrated graphics, you need a video card, this is the main issue. I suspect what happend is when you reloaded you loaded up V1.52. That version whilst containing essential memory fixes, also placed more load on the video card to save main system RAM for low RAM user's. You dont have a video card, so it exacerbated your problem. That main change in memory from main system RAM toVideoRAM is called "memsaver" in the ini file
C:\Documents and Settings\New User\My Documents\My Games\Sid Meier's Civilization 4\CivilizationIV.ini
There is a setting in there "memsaver" set it to Figure 0 (not letter O) to turn off that RAM move (you still get other memory change benefits). However there are bound to be some other changes of a lesser nature that pointed the game more at the video card in V1.52, which you dont have.
The other main problem is Win 98, whilst it has worked before, the game does not support it and you will have increasing problems as the coders will ignore Win98 needs. Therefore performance will degrade over time as new Patches come out. Its highlylikely thats where the "illegal operation" came from, Civ IV expects Win 2000/XP not Win 98, cant be absolutely 100% certain re that specific message,but I am 90% sure.
Its definitely time for an upgrade of the PC, the setup cannot be supported by Civ IV. You might be able to get away with just a Video Card upgrade, but I could not track down your motherboard to check that. Even if it will take a mid-range card, frankly its a big risk with Win 98, I believe it would be throwing away dosh, and likely to end up still needing a PC upgrade.
Regards
Zy