Ubuntu will give you best system usage but xp will allow you to play windows based games... you can of course put them both on but it comes down to what you need this system to be able to do.
It's not a panic, but time goes on, and who would think of using Windows 98? Sooner or later you need to upgrade and, I would say, sooner is better. Older Windows systems don't have the capability to deal with present safety requirements. It's because ones hack as the others plant. Non-ending process.
Old DOS machines work fine, even Commodores work fine, if you use them privately. But the safety in traffic? What about T-Ford, how safe would it be on a modern highway?
Ubuntu or 8.1 would be my choices from that list because they are the most efficient resource users. But if it was me, I would use Mint Mate which is a superb OS. Have a look.
None taken… you have a point but then again it really does come down to what this system needs to do.
As a side topic;
I find my elder clients (hi mum) that purchase a cheap w8 laptop for their internet banking & emails will learn to like it but often still want xp because it plays her favourite card game:
Dual or multi boots where xp isn't attached to the net are very safe personal computers,
A company that has their virtual xp on vmware or hyper-v attached to the internet is safer than windows 7 but imo still shouldn't be used for something like banking.