I would agree with Ashes.

For using a modern distro on old
hardware (or low RAM computers) then you should
be thinking "light" in terms of your desktop
environment. KDE and GNOME are just too
resource-hungry for the older machines to keep up...

You can take Xubuntu and make the computer
even faster by using a lightweight
window manager - you can use synaptic to install
icewm. Icewm is not everyones favorite, but
most agree it is fast and fairly easy to make
your own customized toolbar, menu, etc.
It just requires the editing of some text files,
knowing where to find the icons (usually /usr/share/pixmaps/
or /usr/share/icons/ ) and the linux command
to execute the program.

So with that, I'm running Xubuntu Gutsy on a
DELL Latitude D600 and icewm is my window manager,
with Thunar as my file manager. I'm pleased
overall that I have the 'choice' of what to mix and match.