The computer obviously isnt going to be used to play any new games or anything given its specs so I'd install linux. Try one of the pop-in and go distros like ubuntu, or if you want to optimize your experience even for a slow machine gentoo is awesome. Linux is always a good option for slower machine because it can be streamlined and you dont lose basic features like when you streamline windows. You could try nliteos and hack windows down if you want it to run. I have had windows running on 40MB of ram before. Also try and get another desktop program running like black box for windows and remove explorer.
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