I have a chance to get a new old-stock Neoware thin client laptop (M100) for around $150 with wireless and a decent screen but a rather puny 512 MB RAM and no hard drive but a 1GB flash drive.

I don't want Windows XPe that comes with the unit and was thinking of loading Ubuntu 8.10 but can you load Linux over an embedded OS such as XPe?

Also, would I ever be able to load software via the repositories with such a small flash drive? I've checked into adding a hard drive but that's apparently a no go since no bay exists for it.

I don't know about embedded Linux, but as for the drive, you could always swap the flash drive for a larger one; or maybe get a PCCARD one, if there is a PCCARD slot. In my opinion, with as little as 6 GB you could get along quite comfortably, repositories and all, while every GB over that would further increase the usability. You could also include a removable USB thumbdrive for data. Or you could concentrate on using it prevalently as a thin client, if you have access to a wireless router and a capable desktop to hold the bulk of your data.