I have the same laptop, my first one ever. Still love it and power it on for fun from time to time. It is running a recent debian with X, DWM, Conky, a wallpaper and a bunch of fast apps. I have only 16mb ram. Booting take less than a minute and use 5.5mb ram (with X and everything, including a terminal to check how much ram was needed). It is possible to run recent Linux on it, it just take a little time to trim the fat out. If it have a neofb graphic card like mine, use the kernel framebuffer driver with Xfbdev as X server. It actually run at full speed, as fast as the hardware is able to go. As the framebuffer is accelerated, so is XFBdev. Can run emelFM 1.2, Xmms 1.2, Dillo2 and a few terminal apps at once without ever swapping (well, it does swap a little for me, but you have twice the RAM).
Actually quite fast considering its age and raw power.
Use busybox as the booting shell, xfbdev, trimmed down kernel (drop the advanced networking, just keep the TCP/IP stack and your PCMCIA driver), dwm, remove unless boot services, boot using quiet and no splash. Do not preload data, disable udev, it take too much CPU. With the disparate list, you should get far enough. It's a fun project, love to install Linux with floppy, so much fun.
Last edited by Elv13; 10-26-2012 at 12:36 AM.