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I think the first step for you is to grab a new video card. It should take a load off the memory and processor, and a newer card that's cheap and low-end will support a lot of hardware features that old integrated video will not. The benefits of this are probably good, especially if you want this to last a little while.
RAM is a good thing too. At least start by bumping it up to 512MB.
XUBUNTU is pretty handsome, I tried it and liked it. Maybe LinuxMCE?
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