xubuntu is not much better. Stick with the Unity based netbook version of Ubuntu.
Unity = bletch.
Kubuntu netbook remix (10.04) is what I use on my Eeepc 701 (500Mhz celeron). It's no speed demon but the major factor slowing it down is that half of the OS is on an SD card.
But yeah, Puppy is nice enough for quick and dirty stuff, but the moment you step beyond that you're into a whole world of hurt.
As for E17 having too much bling... I ran Elive 2.0 for quite a while both on the netbook and the F5, it may be heart stoppingly pretty, but it's also brutally efficient when it comes to resource usage, especially on older machines. It actually managed to be in the same ballpark as BeOS R5.1, but was more responsive.
Be aware however, with Elive at least I found that there were issues due to the applications being several versions old. There are ways to get updated ones however which if you go down that route I'll be happy to talk you through it.