My CarPC is still in development as I'm testing various hardware and constantly tuning my software, but so far it runs well and it runs everything I need it to. It's a tweaked nLite installation with even more stuff removed, plus my EWF and MinLogon hacks installed on a SanDisk ExtremeIII 1GB CF card. It cold boots (from BIOS HDD detection to useable desktop) in 18 seconds on a VIA MII 1GHZ with 512MB of RAM.
I think if you're just doing this as a hobby nLited XP plus extra mods found on this forum and elsewhere is much easier to deal with. If you're planning to build everything yourself from the ground up then WinCE may be your solution, but I think we're getting to the point that there's really very little difference between the two when you think of all the stuff people have their CarPC doing. I'm currently trying to decide if I want my system to be closer to a useable PC or more "device-like" (no explorer, war-driving, etc., just telematics functions).