I bought a MENQ easy PC e790 with 2GB flsdh memory and 128 M RAM but no hard drive. It comes with Windows CE 5.0 The specs are as follows:

CPU: Samsung 400MHz/533MHz processor
RAM: 128MB
ROM: 2GB
OS: Microsoft Windows CE 5.0
Pixel resolution: 800 x 480 pixels
Display color: TFT, 65,536 colors
Integrated speaker
Stereo headphone jack: 3.5mm
Standard SD card slot: maximum up to 32GB
USB: 3 ports
LAN: RJ45
WLAN: 802.11b/g

How can linux be installed in CEs place and what distro would be best?

john in atlanta

Since this is an embedded ARM platform, not a netbook, you will need to wait until the vendor (or some enterprising hackers) releases Android for the platform.

Tons of information on these new mini netbooks here: http://ubuntuforums.org/showthread.php?t=1349626

The short answer is, it's basically a toy computer for checking your email, and installing Linux is an advanced project at best.

ps I do have a question for you though: Does Windows CE let you watch youtube and other flash videos?

dependant of wether you can find a distribution for the specified processor or not (more then likely a uclinux based distribution) might work, especially if you can get the device to boot off the sd card
if theres one thing ive learnd is that with enough effort linux can be ported to almost anything, for instance i have linux running on my WRT54G wireless router i bought from wal-mart, so in answer to your question the first step is finding a linux distribution that runs on your machine if such has been made yet and the second is reading the documentation on how to put that on your machine, either an sd or thumb drive based installer, via ethernet or a pre-configured firmware image to 'flash' onto the device either by push (pc to device) or pull (utility on the device loading from a pc) or from a flash device, no matter what though it does not sound like a trivial deal

yes it actually does!

http://www.debian.org/distrib/netinst
if you look there is an [arm] option
that might work