I have an old Dell laptop with a P3 800MHz,512MB ram, and 20GB Hard drive. This thing is a tank. The ram is already maxed. I have seen people successfully run W7 on low specs but don't know how well it will run compared to XP. It does have dedicated graphics and a pretty high res for such an old laptop. How well do those torrents with supposed "lite" versions of Win7 work? It seems like most of them remove important features. I'm probably just going to keep it to play around with then sell it on craigslist for $15-20. So if Win7 is not functional I'll just leave XP on it.
We've got two old netbooks running Windows 7 pretty well. On both it ran sort of OK with 1GB RAM but was much happier with 2GB. You'll never know without trying but my guess is you're not going to be satisfied with its performance. Both netbooks have single core processors in the 1.2-1.4 Ghz range and they are marginal at best. A 20GB HDD is really going to struggle for space. The smallest footprint Windows 7 I have is about 14GB with most in the 19-20GB. You're going to have to have a minimal install.
I'd say 1 GB is barely usable, so there's no way you're going to be able to use W7 beyond boot/notepad with 0.5 GB. Stick with XP. (The 20 GB HDD isn't really the bottleneck here if you use a cut down version of W7, the smallest installation I've had is 1.3 GB.)
Then may as well stick with what the machine was likely designed for: XP. Windows 7 cut down to 1.3GB is hardly worth the effort for many people.
I used lubuntu on 512 mb machine even it gave me headaches. I suggest you add some ram or stick to xp.
I tried out a cut down version of 7 from the bay. It actually runs pretty fast navigating through explorer and using office 2010 and uses less than 300mb of ram at boot. The problem is browsing the internet. MSN's website hangs the computer at 100% CPU. Some sites work like google, and several message boards. But facebook is a no go. Videos autoplaying just overloads the processor. Also couldn't get windows updates to work properly. Some installed, some didn't. I was at least able to install IE11. Probably just going to put XP back on though. Maybe someone can use it to play old games. It also has drivers for 98 and 2000.
I've installed 7 on many small systems without any trouble, albeit not a race car. Once its up and a few programs have run their course, and windows has finished its initial run through after fresh install. Cannot expect a ton of high resource things to run as well as they would with a larger system, but things like set flash to always ask not just load automagicly, things like that help a lot on webpages. Instead of a chopped up version, install fresh SP1-U and remove things from program features that you don't use can help as well. Tweak it tweak it lol