If you want a slimmed down version of XP, try nLite. I used this to install XP on my netbook and was able to get it down to just under 500MB. There are lots of good resources for what is safe to eliminate from the typical install. You can also slipstream service packs and drivers very easily.

I started out with nothing & I've still got most of it left
M60 VP160 QS8 EP350
M22 VP100
Algonquins