If your considering using Linux, Red Hat 9 is good... new versions such as Fedora use around 3BG, and up to 6GB when everything is installed in the desktop option. Red Hat 9 is generally around 1GB with only the options selected that you need.
Just one thing with Linux, make sure your network card supports it as some are Windows only and you may not realise this. This will prevent you from getting the Internet.
Another option is to install Win98 SE and Linux therefore keeping the drivers installed with the Windows partition. I did this on my old 4 GB computer. You need FAT32 to install Boot Magic... since the computer was old it was FAT32 and just Windows, I installed Partition Magic and Boot Magic on the Windows partition before partitioning the disk then installed Linux.... be sure to have a swap file of at least 200MB.
As long as all your favourite programs have a way of running on Linux its fine, otherwise run them on Win98 SE
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