I got hold of this old Dell Latitude 266Mhz Pentium 2 notebook for free. Managed to install XP, and -oh wonder- it actually works (just) for simple applications like Internet etc. But looking for an alternative OS, I came across this live-CD called KNOPPIX (free download, 700MB self-installing image file). It's a complete Linux OS with a huge number of applications that's starts by just loading the CD, leaving XP on the HD intact. The load on the processor and memory is much less than XP does. Recognizes all PC components as easy as as XP does. Runs great.
Anyone has any experience with KNOPPIX aswell??

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2011 Prius

Yes - I've used it extensively, however there are better out there now. If you're dead-set on live-cd, I would go with Ubuntu live or PClinuxOS. They both have great hardware support and are snappier. If you're going to take the plunge and install, I recommend going with Ubuntu. Quick, light and user friendly.

Good luck and have fun

Peter