For this machine I would use Lupq511 windows installer. it will make a "frugal install" using Grub4dos to your windows partition and chain it into your Windows bootloader. (OS is < 120 MB).
So basically you can install it with a few clicks from inside Windows.
You can download an exe file from here. NOTE: I used this several times to quickly rescue some old windows computers.
Maybe before you start, use
chkdsk /f on your windows drive.
There is a boot option (
pfix=ram) which will make it run totally in Ram, so eventually you can also repartition the disk to give it its own Linux filesystem or install another Distro.
(Recommend: Fluppy, small distro specialised in Netbooks/Laptops), and the original thread's here.
Actually any Puppy Linux can be turned into an Windows exe installer file with this technology. It should work on Win 9x, WinXPm, Vista, Win7 (32 and 64 bit) it is still beta, but nonetheless I find this pretty cool!