ANSWERS: 4
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I would definitely go with at least 1 GB of RAM, preferably 2 or more.
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Simply put, install as much ram as you can afford and the motherboard supports. Not everyone has a newer mobo that supports 4 gig. Many older boxes out there are in the 1-2 gig range. Although XP boasts it runs on 128, the bare minimum is really 512 as XP sucks up a little over 300 megs if it's available. A board that has 1 gig on board is not going to be much slower than one with 2-4, for the average PC user. That extra ram never usually comes into use unless you're a power user and can justify the added expense.
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Personally, I multitask fairly well on a mere 768 MB but most of the stuff I run has a relatively small RAM footprint. I am a slightly heavier than normal user for a non-gamer but I do fairly little multimedia. Don't even think of going under 512 MB but don't waste your $$$ on more RAM than you'll use. For me, that's 768 MB. If you do multimedia or gaming then max than mother out. Hell, run the 64-bit edition and smash through that 4GB maximum!
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XP 32-bit supports up to 3.25GB of RAM maxt. XP 64-bit can handle a bit more but it requires a bit of warranty voiding. Hence why you're best going Linux instead of sticking with XP if you don't want to upgrade to a newer version of Windows.
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