There are many distros that install in under 1 GB of HD space. Some in as
little as 10 MBs with GUI. Many will run from RAM, including Puppy Linux.
SliTaz (35 MBs and 48 mBs of RAM) and Tiny Core (12MBs and 48 mBs of RAM)
spring to mind as very small. For the truly adventurous there is MuLinux
and ttylinux (5-10 MBs and will run from a floppy drive) Here is a a
partial list:

http://wiki.laptop.org/go/Minimal_Linux_distros