Dargoon know what sfall is first. Sfall is a mod that allows modders to improve the game significantly and gives us the ability to update and fix issues in the game. Sfall's current version is 4.2.8.1. In itself it has many features and allows major improvements, including highlighting feature and many other things. All these features are optional. They can be controlled through a file in your fallout 2 directory. The file is called ddraw.ini. It's a text file, you can open and read it and tweak to your liking. You should definitely play the game with Sfall. That's the basic explanation about sfall.
Now follow this order:
1. Install falllout 2. (If your copy is GOG you should know that it comes with an old version of sfall. But you shouldn't rely on this older version.)
2. Next you should install UPU or RPU. UPU stands for "Unofficial Patch Updated". RPU stands for "Restoration Project Updated". UPU is a patch that fixes a lot of issues in the game and is HIGHLY recommended. Restoration project adds new content (cut content that was originally planned to be in the game, so its restoring it). An important note here is that RPU includes ALL the fixes in UPU. So if you install RPU, you don't need to install UPU. If you don't want the Restoration Project content and you only want the fixes then you install UPU. You do not need to install original RP 2.3.3 and then RPU. You just go straight to RPU from basic game install. Currently both UPU and RPU are maintained by the same person (Burn) and use and include latest sfall (more or less). So if you install UPU or RPU you will not need to install sfall separately. It might not come with the absolute latest version of sfall but that's ok, and you can update that separately if you want to but you don't have to. UPU and RPU both come with a few ini files and contain features that can be controlled. you can have a look at their ini files as well and see if there is anything you care about to change. After installing UPU or RPU their should be a folder named "mods" inside of your FO2 folder where you can find these ini files. you can
download UPU here and
download RPU here. See Right side of screen for download links.
3. Next you might wanna consider installing Fo2tweaks mod which is also by Burn and it also makes further improvements to the game, all optional, including better highlighting feature. You can
download Fo2tweaks here.
4. Lastly you should have a look at ini files as I explained above and make sure settings are to your liking. You can also update sfall further if you want if its not the latest version, but again this is minor. It's rather easy as well. But up to you.
Extra tools you might like are the
Inventory Filter by Mr.Stalin and the
Save Game Editor by Vad.