His dinosaur is basically the same computer I started with except he has a better motherboard and processor. I also had a 40 GB hard drive and 512 MB of RAM.
Because I am on a limited budget, I opted for a 32 bit installation and an 80 GB hard drive with 2.5 MB of RAM. I installed an Nvidia GE Force 7600 GS video card. I opted for a 32 bit installation because (1) my processor is slow and (2) I decided to save the money it would have cost to upgrade to 4 MB of Ram and put that aside to build a whole new computer. To me, to make my computer run a 64 bit installation would be like putting a Ferrari body on a VW bug - wasted money and limited performance.
If I were he, I would go with a larger capacity HD, install at least 2 MB of RAM and go with a 32 bit installation and a better graphics card. I'd put the other money aside and put it towards a new computer. Then I would go with a 64 bit installation with 8 MB of RAM/
Just my humble opinion.