Yes, FrontPage 2000 works perfectly on Windows XP.
Hyperlinks in general don't work in Preview mode in FrontPage.
I don't have a FP2000 site with hover buttons handy to play with at present, but you could try a local publish or publish to a subweb of your main web on the web server your account is hosted on to see whether things are working properly.
FP2003 does have the ability to edit hover buttons on pages created with older versions of the program though.
If you aren't in a hurry I should be able to offer a more definitive answer on Monday, or someone with more time than I currently have available may step in and help in the meantime.