I'll look into reproducing the problems you're describing. As a follow-up, please send a mail to email@example.com
reporting this. As a workaround, you can try using 'insmod -f' to insert the 1.0-2960 NVdriver on RedHat 8.0.
With regards to your other question: You can use the "nv" driver for 2D. The "nv" and "nvidia" drivers are not dependent on each other in any way. However, 'nv' support for the GeForce4 GO cards is only available in XFree86 CVS, as there hasn't been a (non security-fix) release of XFree86 since January.
I hope this answers some of your concerns...