If your comp is stable at the slower timing settings Id just leave it at that.

Set the bios to 'by spd' in stead of 'manuel'.

I wouldnt spend money on new ram just so you can have a cas latency of 2 instead of 3. It will ceratainly make your comp faster, but only by a few un-noticable benchmark points, those extra points just arn't worth the money.

I wouldnt say it it faulty ram either just possibly slow and surprisingly not very overclocking friendly for ddr.

If you have a dodgy stick in your comp you will probaly start getting bluescreens saying 'Driver irql not less than or equal'
For those of us who didnt write the explanations on blue screens it just means your ram is worse for wear. Not concluding its un usable or ruined, thought it probably is static from those fingers We've all played around without an anti-static band im sure.

Even if you do get the 'driver irql not less than or equal' blue screen its just the way xp works.
Apparentky win 9x didnt test components before it used them, nt based OSs do and this is a common error.

Just run it at relaxed settings, im sure you wont notice much, if any performance differances.
You have the added benefit of a system which doesnt bottleneck too.