Firstly I would like to start off on a very positive note, if there is an up to date modern operating system suited for your aging system, I bet you it would be Linux and Linux only. So ignore any negativities you may encounter about the impossibility of the task etc. One of the major advantages of Linux is its ability to run on any hardware, chances are you’ll find what you are looking for within the multitude of distro’s out there. In fact it’s well known that Linux is used all over the world to recycle and revive presumed “obsolete” machines which can be acquired at a low price or even free, these machines are then used to teach kids, or to help to run small businesses/projects etc which couldn’t have otherwise afforded new hardware/software.
A few tips/advice:
-Don’t take any one’s word for it, if you can, download the various distro’s that may be suited for your system and try them out and see which one works the best within the limits of your hardware, until then you will never know.
-Linux is very flexible and tweakable and most distro’s have excellent support to make your chosen distro work well.
-There are many people who are dedicated to reviving old and presumed dead PC’s with Linux. These people usually publish their experience online and there info is very useful and pertinent to what you are trying to do. I’ve posted some of these websites below.
-Real expectations: If you want a trouble free OS, where you can browse the internet, use a word processor, play some “simple” games, maybe watch a DVD if your system allows, than that's great. If you want something more than this then you need to buy newer stuff.
My humble experience:
I have an old desktop PC, never been used for about 5 years and was about to be thrown out when I thought of trying to revive it as a side project.
Its basic specs: P-III, RAM: 192MB, HDD: 10 Giga Bytes, it was setup about 10 years back!
-I installed Xubuntu 8.10 on it (please use Alternate install CD) and it worked very well, although the installation did take its time.
-The Linux distro that that I really, really loved and was glad I discovered was Puppy Linux. It’s amazing. It worked brilliantly and I loved it so much I put it on a USB flash drive and use it on a “modern” laptop I have as its works so well and on any system and its very fast. This is the distro I would recommend, you won’t regret it. But please try Xubuntu and other distros and experiment with them.
Other distros you may try but I haven’t: Damn small Linux, Slackware, etc.
Good luck!