I use it at work. Not sure it is "better" than XP or the other way around. It is more stable (crashes much less than 98) in a work environment, but not sure I'd recommend it for gaming.
XP still has some programs that won't run on it. I'd get it with a new computer, but probably not worth the upgrade price.
XP Home Edition will almost certainly run your games better than Win2k. That is, if it runs them at all. Better check first.