LinuxQuestions.org - Dell Dimension 8250 Emulator/storage PC restoration

I have an old Dell Dimension 8250 desktop (2002, made for XP Home SP2) Im trying to put to use.

My plan is to strip it down, and use it to store files I want long term (movies, music and docs) and also have it be a light web browsing/gaming machine (some emus like epsxe, project64, snes/nes, with an Xbox 360 controller plugged in with Chrome or Firefox)

I have 512MB RAM, a Nvidia video card, if anything else is important I can get the info. Got the discs from Dell and clean installed XP Home but once I got it up to SP3 it really crawls. Ubuntu 12.04 didnt run SUPER well (mainly menu issues like icons only showing once I scrolled over them) but was reasonably quick to open apps where the XP install would take minutes for certain programs to open (Chrome would take 2 minutes or so to open then load the URL).

Gonna do a once over with Spybot/Malwarebytes/Ccleaner/Decrapifier to scrub out the gunk and Double Driver back up to save time after OS reinstall.

So based on what Ive read, Lubuntu seems to be the lightning bolt to Dr Frankensteins monster when it comes to ancient machines like mine. But will it do what i want it to, and will it be actually playable? How about legacy apps like Morrowind or Diablo 2? Will my Android device work with it (ie do i need to configure anything or just plug and play? Samsung GS3)?

I also have a Legit copy of Windows 7 Pro laying around. Would that be a better OS for this than Xp or a Linux distro?

Secondary issue: While installing Ubuntu I partitioned the drive (120*GB) to a 60/60gig split to dual boot incase i needed the xp side. Now i cant figure out how to get that 60 gigs back onto the one directory. Closest ive come is setting what was the ubuntu side as Z:\ drive and formatting it to NFTS. It works but would rather it be back as a part of C:. If posting 2 problems in one post is a no-no, just look at the main OS question. I can deal with this one.

Any help apprciated