Thanks Derek & Flame
Problem now solved but via an indirect route. It may help others, so here's what I did.
First squeaky cleaned the laptop [Toshoba] with multiple AV, spy & anti-ad software. Problem still persisted. Then ran Process Explorer, which identified that some sort of indexing was going on complements of a file named mosearch.exe. This turns out to be the MS Office search service.
A Google search on the file name took me to CastleCops, where I found: "Mosearch.exe--Fast Search in Office XP - similar to the new revision of the Find Fast feature in Office 2000. Fast Search uses the Indexing Services in Office XP to create a catalog of Office files on your computer's hard disk. As with Find Fast - a waste of resources."
I couldn't agree more!
I have now disabled the function & the laptop no longer churns away all the time.
Yes, ME is flaky, but how can Microsoft build in something like this that not only wastes resources but also interferes so much with scandisk and defragging???
I'll start a new posting for my remaining WinME hassles.