Should I install Ubuntu or is the CPU too weak? It says the CPU is 64bit capable. So which version should I install? Should I use Unity 2d? Will Lubuntu be significantly faster on this PC?
Ubuntu should run perfectly fine one that machine, but just to check burn a live CD and give it a go!
As for Unity 2d, have a see whether Unity 3d runs fast enough for you, 2GB of RAM and that CPU should handle it perfectly though.
32bit vs 64bit: Depends whether you plan on upgrading to 4GB+ of RAM really as this is the only real difference nowadays. I always but 64bit where I can just to be on the safe side and haven't run into problems so far.
Lubuntu will run slightly faster but not enough to compensate for what it lacks in comparison to Ubuntu's Unity in my opinion. If you don't believe me make a live CD/USB of that too and give that a go!
Hope this helps