Battery wont recondition anymore

Well I could say that it is just the batteries time and time to get a new one. As it is an 'older' battery (one based on NiMH) they don't have issues with 'Memory Effect' but could just be tired. Check this link for a person who has taken apart your style battery and found shorted cells as well as replaced the cells one at a time to make a new battery.

http://www.wwc.edu/~frohro/520Fixes/520_&540.htm

I would be so bold as to say that being that in 99 this person spent 50 pounds replacing the innards of the battery and that same battery is selling new for 55, i would say it might be break even even to get a new one, you will thank yourself for not having to go thought all the dissasembly etc...

Whats wrong with my ancient battery?

The problem with the ancient battery is that it's ancient. Batteries lose capacity over time, and it's irreversible. At some point, there's no capacity left. Can't break the laws of chemistry.

MWWD
The 500 series PBs use so-called 'intelligent' batteries, which contain a microprocessor power-manager. However, if the stored energy drops below a level that can maintain the microprocessor's memory, the battery no longer remembers that it is intelligent. This, rather than chemistry, is the cause of much PB 5x0 trouble. The messages that you have are evidence of that. It is possible, but not certain, that you can overcome this by repeated attempts to recharge a battery in the PB, usually by not inserting the battery before you have started the Intelligent Battery Recondition application and after the app. has mentioned that there is no battery in the right-hand bay.

Much more effective, however, but still not certain, is to use the application EMMpathy from VST Power Systems to kickstart the microprocessor, or, if you can find one, VST's VST SmartCharger 500. As a last resort, new (higher-capacity in mAh) batteries are available. In Australia they can be had for AUD85-90. Your mileage may vary.