Just out of curiosity, would NX be an option here? I've been pretty happy with running the NX client on XP boxes and NXserver/FreeNX on our development server (Dual P4 Xeon 3.2 GHz, 4 GB RAM) but that's not comparable to the box in question. I have used NX to run an XFCE desktop remotely on a less robust system (PIII 800, 128 MB, I think) and it was usable.
Just my $.02.