I advise putting in the extra RAM and maybe trying Gentoo. It should be possible to make a very stripped down install which only includes the stuff you need for your gaming setup, but unlike many other lightweight distros, installing the programs you need should be supported through portage.
Some game emulators use OpenGL, so it may be worth finding out more about your graphics card, I've not had a lot of luck getting 3D graphics acceleration working with older graphics cards.
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