I used to run Ubuntu on the same CPU but with 1Gb of ram. Ram is going to be your issue here, the CPU while not quick will do. Ubuntu can run any of the available Window managers (it's a bit like win 3.1 on top of DOS, you can run other shells so to speak) so you would be OK with Ubuntu if you ran something like XFCE for the Window Manager. I've just re-installed Ubuntu 10.04 on a old eee pc with 512Mb of RAM and it runs OK. If you could find a little more memory it would help.
However I think what might work VERY well for you is this:http://dynebolic.org/
Now it's not been seeing much development in the last few years but it's designed for K5, low memory footprint and has all the music tools you're likely to need right out of the bag. It's also a Live CD so you can try it without installing it, just boot the CD.
I'd not normally recommend an old distro like this but if you are not planning on hooking to the net much and can live with knowing you have the odd security hole (what's the worst that could happen, you loose some Midi files!) then why not.