I've been looking at a very interesting variant of Linux called Damn Small Linux, (hereafter called DSL). Its 3 major contributors have basically taken a minimalist approach to Linux and have created a system that can provide a basic desktop running on an OS that's right around 50 Megabytes.
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I have played with it a little bit and its amazing how fast a 600 Mhz P3 can run when its not having to drag around Windows baggage or a large Linux OS install. There are a couple of user interface issues that take a little getting used to. A right click on the desktop opens up a new menu of applications to run in place of a menu bar across one edge of the desktop. You'll get over that quickly when you see how fast the application will pop-open.