I run XP on a PII 450, 256mb ram, 20GB western Digital 5400 rpm hard drive w/2MB cache, and a PCI ATI RAGE 128 graphics card. It's quick enough to do everything except play newer intensive games (it'll play Quake III fine), and it would be pretty slow at encoding work. However, the computer works great for my friend, who uses it mainly as an office computer and multimedia player (it's just fast enough to play DivX without dropping frames). he also uses it to burn CDs and sync MP3 songs with his Sansa e260. It's a decent computer for being 100% free.
But really, unless you absolutely need XP for some software requirement reasons, most old computers do fine using a 9x or Windows 2000 OS. Afterall, the only real point in having faster, bigger, and better hardware is to run larger, more resource-hogging applications (or to complete lengthy tasks in a shorter amount of time, such as encoding). With the right software you can make almost any computer fast. After all, a Pentium 233 MMX might be super slow trying to run today's software, but put it in a Windows 95 environment and it will fly. Of course some things simply require a minimum amount of CPU power/RAM (prime example: a modern Lexmark USB printer simply will not print with a Pentium 233 MMX; it's just not fast enough to keep up with the printer), that's why it's always a good idea to know exactly what you'll be doing with your computer before building it, so you don't over/under build.
As for Ed, the orginal poster of this thread, why Linux? If you have a copy of Windows 98SE or Windows ME I'm sure the computer would be much quicker. I've tried DSL Linux on a Pentium 200 MMX with 64MB ram vs windows 98 on same machine, and Windows 98 was MUCH quicker, and you really can't get a less-demanding Linux distro than DSL and still expect to have a semi-usable computer. Honestly Ed, try windows 98/ME or even Windows 2000, if you have a copy of these OS's handy.