Last year, I would get old, scrapped PCs from a recycler, put a larger (but still recycled) hard drive in them and load Mandriva Linux 2006 on them. They preformed just fine. Nothing screamingly fast, but they worked faster than when Windows was loaded on them.

My personal preference is for Mandriva Linux. The 2009 version was just released.

But I've also played with Ubuntu and found nothing to turn me off with it.

You probably don't need something like Xubuntu unless you were trying to load Linux on a really small, very low powered system.