I'd use slackware on that box (I use slackware on an old Sony VAIO w/ 200Mhz. processor and 64MB of ram as my parents firewall)
Don't bother installing any of the X packages, they aren't really necessary. You can use any MTA package as none of them are all that processor/ram intensive unless you are handling a boat load of e-mail. I personally use qmail but use whatever your comfortable with. As far as net filtering, I setup an iptables firewall and a transparent SQUID proxy. This provides the ability to block certain ports if you wish, and provides caching and logging of websites visited.