ooma

This isn't an a shameless plug or anything, I have no affiliation with these guys other than yes, I did buy a cheapie server from them and it works great! I use it for game servers like L4D & 2142 & all the old classics (red faction, quake series, etc.) The main thing to watch for in my opinion is the Hard Drive you plan on using with it. These are IDE only & the $99 one only accepts 1/4" single-platter drives or maybe a laptop drive. but it's perfect for me :) I popped a 500GB IDE drive in the dual 3.06 Xeon / 2GB Ram one.

dubba dubba dubba dot weirdstuff.com/cgi-bin/category/10174

Tiny 2003-Vista Edition runs great on older machines using very little resources - people are playing around with the asus EEE version of WinXP as well and the Beast edition of TinyXP. Otherwise, I prefer an older debian-based version of Mepis. DSL (Damn Small Linux) might be an option as well. I'd say that's probably fast enough to run straight WinXP though.