APCMap has an insightful review of their experiences with Windows XP on the Asus Eee. This isn't (yet) any different version of XP than you'd have on a "normal" PC -- it takes up 2 gigs of the 4G drive, and it's not even up to date:
“Disappointingly, the OS image hasnâ€™t even been updated with the latest versions of Windows Media Player, Windows Live Messenger and so on. This makes for a massive update session the first time the user goes online, and thatâ€™s not a good way to start the relationship.
“Itâ€™s as if the Eee PCâ€™s display is a small cut-out window onto a desktop which is slightly taller. You nudge the mouse cursor to the top or bottom of the screen and the display pans up or down accordingly.”
With that performance, I'd rather find a way to run a BartsPE liveCD from the hard drive, reducing the footprint to under 640MB. Asus is "prepping a special edition Eee PC that will be preloaded with a cut-down version of XP which is expected to be available within the next eight weeks." however, and it should include current updates and weigh in under 2G (....but not by much).
It seems XP is not only holding on as a desktop OS, but it's getting a new life on mini devices. On the one hand, this will hopefully help convince MS to extend XP's life once again; or at least revisit their approach on OS design to continue to support "low-end" machines. On the other hand, Linux is much better poised to deliver useful, modern, products for low-end machines with their support of older hardware, weirder hardware, and different configurations, and it's make my Penguinista heart warm to see XP continue to fail to deliver a good experience on this growing low-cost; stable performance market.