you can use Win 98..Xp need more RAM to run smoothly.I hale old PC to, celeron 533, still using win 98..
I would recommend a Linux distro with fluxbox window manager. This will make you pc come alive as fluxbox uses very little memory. The best distro would be Fluxbuntu which is basicly Ubuntu with fluxbox windows manger.
i will suggest windows 98.although it is oldest yet the best windows till now in terms of speed and functioning............ it has minimum file data base to be loaded and only some hundred or more files on hard disk.... you can also go for windows XP. only home verson .... don't go for professional
Depending how old you class the hardware, I'd recommend DSL (Damn Small Linux) or Xubuntu. If you go for xubuntu, use the alternate install disc (the one that isn't graphically intensive) to help install it faster.