im using xp on my girlfriends 266mhz pent II with 64mb and 3gb right now so it will definately run on your laptop.
thats not to say that it runs well but she likes it cos it looks pretty. id rather 98 on it but anyway.
xp takes almost 2gb i think. 98 can be cut down to like 300mb or something, less if you wanna lose iinternet explorer, i get 45second cold starts with 98 on my car pc (as below) which i okay.