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I'd recommend Fedora. Those specs are actually pretty decent for a Linux box, except for the hard drive. They list hardware requirements as being:
CPU:
Minimum: Pentium-class
Recommended for text-mode: 200 MHz Pentium-class or better
Recommended for graphical: 400 MHz Pentium II or better
Hard Drive:
Custom Installation (Minimal): 620MB
Server: 1.1GB
Personal Desktop: 2.3GB
Workstation: 3.0GB
Custom Installation (Everything): 6.9GB
Memory:
Minimum for text-mode: 64MB
Minimum for graphical: 192MB
Recommended for graphical: 256MB
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