You'll be fine with those specs. I have a 600Mhz PIII with 256MB RAM, and it runs Slackware 10 very nicely indeed. It would benefit from doubling the RAM to 512, though - KDE is just perceptibly "laggy", but then it's a notorious memory hog, much as I like it. No problems at all using XFCE, Fluxbox or IceWM.
In every other respect it's just as usable as my main Athlon XP2400 machine, at about 1/10th of the cost - a princely £36 ($67) from eBay.
Hope this helps,