I have used Ubuntu 11.10 ona t42 and all the drivers are there, works like a dream!
Unfortunatly the T42 doesn't have a pae supporting processor so it didn't want to have 12.04 LTS installed, but I imagine there might be a work around for that somewhere.
But other than the pae issue Ubuntu works fine on a T42 which is similar enough to the T40 to almost guarantee support.
To recommend a version I would need to know the specs of the computer (CPU, RAM etc). Although if you create a live CD/DVD/USB then you can boot into it and see for yourself without making any changes to your current installations/set up.
Hope this helps,