Welcome to LQ!
My 5 year-old has a Compaq with an AMD-K6 233Mhz, 96 MB RAM, 4 GB hard drive.
She is running Slackware-10.1, using Thunderbird, Firefox, and xterm primarily, but
not only. A big key is your window manager / desktop environment. You don't have
enough RAM for a resource user like KDE or Gnome, but you could run Fluxbox as she
does ... it only needs about 3MB of RAM.