My first MC only system was a 233...and that lasted about a month. Doing most tag functions, getting artwork, converting formats just crawled along, and I pulled my hair out. I pushed it to a PIII 600E, and that made it 9 months. It was better at all functions 3X over, but it still lagged at certain functions (like thumbnail views, hairstyle, tagging and the inherent "frozen MC pause" when utilizing a very large library as mine. The pause could go on for nearly a minute.) Now I have it on a 2.5G and it's very happy no matter what I do (although the "pause" still exists, it holds for only about a second or two at worst.)
I hate to disagree with Nila (cause it's rare) but stay away from 98SE. Yes, that system is a bit low on space for XP, so get more space. 384 of RAM is fine, but XP likes to be installed on HD's larger than 4G, and the best setup is to have at least 4-6G of free space on your OS drive at all times.
Good luck!