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Ther are some small/marginal speed advantages with a FAT32 file system, but not enough that you'll notice. NTFS is the preferred option for disk management and especially security. The only exception would be if you need backward compatibility for older FAT-only OS's on that same machine...

Ports 137 thru 139 are for NETBIOS communications, which if you've got enabled (for Msft Networking and file sharing), could be normal. Port 500 is defined for (UDP) use with the ISAKMP (Internet Security Association and Key Management Protocol), which in most cases is probably a VPN connection...

While the upgrade from 7.x to Rel8 isn't rocket science, it does require a lot of pre-planning, and a thorough understanding of the Peoplesoft Internet Architecture (aka PIA). Technically speaking there isn't much diff between upgrading on-site vs. the Psoft Lab; that should be dictated more by...

I suspect that your machine has been intruded in some form; do you use an anti-virus s/w package? If so, first insure it's updated with the latest virus definition files, then run a full a/v scan.