There is absolutely no need to use SET ROWCOUNT in SQL Server 2000. SELECT TOP works just fine except that you can't use a variable to define the TOP number of rows.
Yes, FKs will slow down any deletes. Turning off the FKs during deletes might make the deletes go faster but it will allow people to put in bad data if you turn off the foreign keys, so don't do it. Just be patient and let the DELETE loop do its job.
Also, don't make the stop condition to look for 0 rows deleted. Make the stop condition look for a number of rows that's less than the batch size. Only the last batch controlled by the loop will have that condition. If you look for 0 rows to be deleted, then you have an extra iteration of the loop and it will be the longest iteration because it will likely take longer to find that it has nothing to do.
If you are deleting more rows than what you'll end up with, consider not doing deletes. Consider copying the rows you want to keep to another table, rebuilding the indexes and FK's, renaming the original table to tablename_Old and rename the new table to be what the original table name was and, if everything went ok, then drop the tablename_Old table and you're done.