IMO, 256MB is just enough to have good performance with little slowdown. In a few systems I've built, my friends have said that they've barely noticed any slowdown. One of my friends even plays a few games, and still runs pretty good. If you do graphics and CAD, or video/audio editing, then more memory is best.
Anyways, to stop rambling, yeah...256MB would definitely be the minimum amount I'd put into a Windows XP-based system.
Bryan
<A HREF="http://www.btvillarin.com/phpBB/viewtopic.php?t=329" target="_new"><b>My System Rig</b></A> (courtesy of <A HREF="http://www.btvillarin.com" target="_new">btvillarin.com</A>)