Running Debian 5 on an old dual 500mhz sparc box and it runs fine, I really only use it to play doom any more but it does that well and play mp3 searchs the web, etc, etc, etc.
Its not the distro so much as the X enviroment, All the MAIN distros will run fine.(Opensuse, fedora, ubuntu, debian, redhat, slackware) And thats really not that old of hardware. Though I wouldn't run KDE 4, just like you won't run vista ultimate.
XFCE might be a good choice, but if your ok with getting technical and want more speed something like Fluxbox would fly on that hardware. Literally fly and if you read though the documentation on fluxbox you can make it look really sick.
WITH UBUNTU, try the following commands
apt-get install fluxbox
to install fluxblox
apt-get install xubuntu-desktop
to install xfce with ubuntu tools
or
apt-get install xfce4
to install plain jain xfce, (which is pretty nice)
To change X enviroment go to gdm or kdm (the login screen) and change sessions.
Click options, sessions
And select the session you want to run(fluxbox, xfce) and when you log in it will ask make this default and select ok or apply(can't remember which on off the top of my head)
Good luck
(on opensuse it would be zypper install xfce4, and fedora yum install xfce4 though the package name could be wrong but a quick search
apt-cache search xfce
yum search xfce
zypper search xfce
respectively)