I'm a linux fan but not an expert on linux
Your system is quite slow and the amount of ram will not help I have a similar system a Toshiba laptop Pentium III at 700MHz probably 2x as fast as your Via C3 and I have the same amount of memory 256MB RAM.
I will probably use SLAX on your system it uses KDE 3.5 similar wit windows and you ca use VNC is already included and probably VLC for video playback.
But I guess the best solution for your box will be GeexBox
Last time I use that was about 2 years ago but is the best you can find in this category.
Ubuntul will not work but if you like the idea then test Dreamlinux I tested 2.2 on the PIII (worked great) I do not know if the 3.5 will work but is much lighter than Ubuntu.
PS: please do not spend money on windows for that machine.