Wow! Could you pick a topic that will garner more opinions? Hehehe...
You did not mention your video specs. The rest of the system has more than enough power to provide a functional platform for newer versions of the Windows OS, but both Vista and Win7 like (need?) upgraded video cards for best performance.
If you have very basic video and you have access to a valid XP license, that may be the best route to take. Keep in mind that XP will be end-of-life in a few years and therefore there will be no more security updates for exploits.
If you have a decent video card then definitely consider one of the newer Windows OS version. Personally, I would avoid Vista. I have had persistent problems with file transfers, how long it takes to populate network boxes and seemingly simple tasks that XP breezed through. It was a catastrophe of an OS. I give two thumbs up to Win7. I have used Win7 on one of my sandbox machines since early in the Beta tests. I'm impressed.
** BUT **
Since the unit is bare of an OS and purchasing a WinOS after the fact can be much more costly than getting one bundled from the get go, I can highly recommend that you give one of the desktop Linux distros a shot. Most of the developed versions will offer you everything you need for basic office needs and internet surfing. Try Ubuntu, Mepis, LinuxMint, Fedora12 or any other number of distros. They all have pluses and minuses. I have several full-time Linux installs that I use on a daily basis and they all compare favorably to the best that MS offers.
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