I'm wondering will I be able to run Ubuntu 10.04 on a VPS with 256 RAM, and if not, what's the best OS to run on that VPS?
This VPS is more than enough for a Ubuntu Server but not enough for a normal Ubuntu with the graphical environment (Ubuntu minimum requisites). If your python script doesn't need to draw things, it will be ok.
If you need to run a graphical Ubuntu with only 256Mb your best option is Lubuntu
Note that usually a VPS offers assume that you will use the server version and don't make any provision for graphical access.
You can see the minimum system requirements here: http://en.wikipedia.org/wiki/Ubuntu_%28operating_system%29#System_requirements
Installing from the CD requires a minimum of 256 MB of RAM.
But there is one operating system that comes to mind: puppy linux. Maybe that's an option. People have succeeded in running Puppy with a 333MHz CPU and 64MB. To be comfortable 256MB RAM and a 512MB swap file will run smoother.