it is possible to rename the named instance of SQL server 2K, first use sp_dropserver and sp_addserver (drop the old server name and add new server name in sysservers table). Turn down the instance and create the same folder structure as the old installation folder for this renamed instance, both for installation folders and data folder appropriately i.e $OldInstanceName to $NewName, also search and replace this old instance name in registery.
then run the "rebuildm" utility for rebuilding the system databases now reboot the system and make sure SQL server is running under new name. Then detach and attache the user databases to the new location (new folder i.e $NewName)
The shortest path is Uninstall/Reinstall (Easier than any other route)
For confirmation http://support.microsoft.com/kb/260414/en-us