I've used a powerbook wallstreet (300 mhz, 128mb ram).
My suggestion is a minimal ubuntu server install and then, if you're skilled, pure command line, otherwise a light fluxbox and a little eyecandy with wbar.
I use this little beast as a terminal client to access my desktop when I'm in the kitchen or in the bathroom and I need to surf the web or similar stuff.
It also works as a torrent server with rtorrent and samba I've created a network folder where I just put torrent links from my other computers it "eats" the torrent and gives me back full downloads con another share respecting my bandwith limits during daytime.
Your needs and creativity are the only limit on an old pc.
Just be patient, use command line and NEVER GIVE UP.
My little boy is standing up with wbar, desktop and conky using 60mb of ram :)
the mediacenter idea is definitely NOT for very old hardware
maybe using openfiler to turn it into a NAS? :)