I would use 2000 on there, it should be fine...
go with the memory if you can...
btw: I have an old crappy NEC laptop 133mhz with a bad floppy drive connection on the motherboard and I put a Win2000 cd in and found out it could install from cd, so I did...it has 40megs of ram...it was SLOW, but I had it in my dorm room (about 2 years ago) and it stayed running with out crashing for about 4 months with people using it jump on the internet real quick (well not quick....but faster then going back to there room I guess) and you guy even used it all the time to type papers since he didn't have a computer...but anyways...it stayed running with no crashes for a couple of months before the semester was over and I had to power it off to pack I up...it was slower than crap and I have recently put Red Hat on it, but I have never had a windows computer stay on and running with no crashes that long...just my personal experience and preference of 2K I guess...but I think I'll be putting it on any windows computer I can run it on for a while coming...