My only experience is with Ubuntu (posting from it now), not Kubuntu (KDE) or Xubuntu (XFCE). I would reckon Xubuntu is worth a try, and the reason I say that is that I'm really impressed with hardware detection and even more impressively, the Ubuntu community...
www.ubuntuforums.orgThat said, Xubuntu might still be a little bit heavy on the RAM front. I believe you can use lighter WM's like fluxbox or IceWM, but I have precisely zero experience.
I started off like you wanting to revive an old PC, but you might find, like me, that you end up wanting to see what it looks like on more modern hardware. I eventually installed it on my 2400XP (1 gig RAM) as a dual boot system (very reliable partitioning on the Ubuntu install cd, no need to worry about your XP) and now I boot into Ubuntu 90% of the time, only using XP for games.
With the old laptop I tried, and had less luck, DSL, Puppy, Beatrix and some others. Ubuntu impressed me mightily though.