Linux is ideal for prehistoric PCs
AN AUSTRALIAN secondary school has put its old computer kit to good use with Kubuntu Linux, freeing up new hardware to make more PCs available in classrooms.
Westall Secondary School in eastern Melbourne had 3Ghz dual core PCs with 2GB of RAM running web-based kiosks in the student library. Its IT department realised those machines were overkill in that application and tried out the KDE flavour of Ubuntu Linux on older PCs that had been abandoned to install Vista.
The school found that Kubuntu performed just as well on the older gear as on the newer, more powerful machines. Six older machines running Kubuntu now serve as web-based kiosks in the student library. The newer PCs they replaced have been moved back to classrooms where students can use them to their full potential running more demanding applications.
The school's IT staff initially tried Ubuntu with the Gnome desktop manager, but found that the KDE desktop's kiosk tool on Kubuntu provided more control for securing the workstations.
Library staff simply turn on the computers each morning. The machines boot automatically into a restricted Kubuntu desktop and launch the Firefox web browser with a kiosk lockdown function to run the student library application.
Westall's network administrator Daniel Stefyn said, "Using Kubuntu, we can easily extend the life of older hardware with little performance drop. It was easy to secure the workstations and train a student technician to maintain the hardware."
The school now plans to install six more older computers as Kubuntu kiosks in its international student lounge. ยต
L'Inq
Computerworld
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For older machines that won't run Kubuntu (or Ubuntu/Fedora/Debian/Suse etc) at a decent speed an LTSP installation would work wonders.

All they would need to do is re-use one of the Vista PCs, install something like Kubuntu or Edubuntu on it and then install the additional LTSP packages. The older machines (things like Pentiums up to newer machines) could then boot up over the network and display the programs whilst the server actually runs the programs.

See http://www.ltsp.org/ for more info about how to do this. It works really well and makes good use old kit.

Rob
This is what you get when people don't get enough MS training. They find out that an unsecured machine can run rogue code that will make the computer work for them and not MS.
This can be prevented by restrictive licensing agreements like those in a lot of UK schools.
Many of the prehistoric PCs come with a motherboard that has Wake-on-LAN on-board. With that it is easy to build a file server for the entire family, with Linux installed, of course. Make it sleep whenever it runs idle to save a watt, and put it into a locker. The desktop PCs, prehistoric or not, get a quiet notebook harddisk for the operating system, pagefile and a few applications, and a fanless power supply. If you can, install a fanless heatsink solution for the CPU. Add a wireless network if you will. No noise, no disk space problem, daily backup. Hey!

Now install your own web server, mail server etc. on your prehistoric PC in the locker. All on Linux at no charge. Share what you like with the rest of the Internet. Long live your prehistoric PC. Nice thought, but unfortunately most Internet Service Providers are blocking all inbound traffic to your server. They are worse than the Chinese government.
I run FreeBSD 6.3, Xorg11R7.4 and KDE 4.0.1 on a now ancient AMD K6-2/500 with 384MB RAM, Nv5700 GFX and 40GB HDD. 

Surprisingly, it runs everything quite well. Firefox 3.0b5 renders almost all pages in just under a second, GIMP works great, and both Wordperfect 6 (under Linux emulation) and OpenOffice handle just about everything I can throw at it.

Given that I never use it for games, why shouldn't it be able to run most programs? I mean heck, Amigas used to run on just 7.1MHz. Systems with 500MHz should still be more useful then just a paperweight.
When the hard discs fail -could always replace with a solid state drive (e.g. Transcend) - say 2Gb or even less. Very quiet (ha); low power; knock resistant and very quick. My Compaq 800MHz Evo (384Mb mem+ 4Gb SDD) boots stock Kubuntu far faster than the 2.4GHz Evo (1Gb mem +120Gb disk) on stock XP. Apps seem to load and run on steroids also.

Very easy/cheap to build/acquire! (my wife much prefers the 800Mhz Evo + Kubuntu to her work 2.4GHz P4 + XP)