I've used RHL (way back in 2000), a Knoppix HD-install (around 2002) and a couple of other distros on an ancient Cyric M-II 333MHz box with only 192MB RAM. Except for KDE, which I've always found a bit slower, it seemed to work great.
I haven't tried any recent distros on that machine, but I use Ubuntu on my notebook. I'd usggest trying Xubuntu (Ubuntu + XFCE - I think it's much lighter). All you need is an Ubuntu "server" install, plus X and XFCE. I'd say give it a shot. RAj
