I think the best option is neither XP or Vista. The Windows 7 RC is free to use for a year and by that time 7 will have been released so you could buy a copy. I am running 7 Ultimate with aero enabled on a 1.6ghz single core Atom with 1gb of ram and a Intel gma 950 without any problems so running it on lower end hardware isn't a problem.
Also what parts were you considering for the system?