The HD is a little small but nothing to worry about.
10.4.7 will run on this machine quite happily.

I would trash Norton System Works, an oxymoron if I ever heard one, and go with Disk Warrior.
You are using 10.2.6 because you have never upgraded your OS. I'm not sure I follow your statement that you are running that because it works with all the freeware. The statement should be that the freeware works with 10.2 You might consider chunking some of the freeware if you have a ton of it. Is any of it essential? There is a possibility that it will not run on the Intel Mac anyway.
Check Epson for Intel Mac drivers for the scanner and printer.

P