exactly -- as i said, MS minimum requirements are always BS. don't need an insane machine to run a good OS, hence Linux.
Perhaps Windows 7 Starter is enough? I've tried to install it in VMWare with 512MB RAM. Memory usage at login around 250-260 MB, then after 10 minutes around 210-220 MB, no other software installed and/or running.
Had Windows 7 Ultimate running on a ~6 year old Dell Inspiron 1100 laptop with a Celeron processor, 512MB of RAM, Intel 82845G integrated graphics, 20GB HD, and integrated sound. The thing didn't even have a wireless network adapter it was so old... The OS ran great though in 1024x768 (32-bit true color) max resolution. Aero was disabled of course due to the integrated graphics, but the OS it's self ran very well. Installed MS Office 2007 on it as well and everything ran great...
I tested with an 3.06 GHz P4, MB Asus P5S800-VM and 1 GB memory the RTM: WORKS ok! I installed by mistake the 64 Bit but it was working. Later I was move to 32 Bit.