I use nLite to strip Windows XP so ir requires minimal HDD space and a low amount of ram.
I have a Thin Client with a low power mobile AMD 1GHz CPU (not fast) and 128MB ram and 1GB ATA flash storage.
Shrinked Windows XP keeping functionality down to 200MB HDD install and 50MB ram usage and it flied quick on the Thin Client.
Later I added put 1GB ram in the machine and 10x 2TB hdds with USB adapters and now I am using the thin client as a Torrent seedbox, works perfectly and does not consume much power, perfect as a seedbox
If anyone want a quick Windows XP but do not want to use nLite check out "TinyXP", runs great and requires very little.
So for me WIndows XP works great for a lot of things, good compability for new software and a small footprint is a great combo for slower machines
You can shrink Windows 7 a lot also but it's more heavy overall and not needed on slower machines, Windows 7 did run like crap on a 766MHz Transmeta Crusoe CPU with 128MB ram and Rage XL graphics chip but WXP ran nice, W98 was to limited and Linux had drivers issues.
Well yeah I like buying Thin Clients and use them as standalone PC's