I'll agree with most sentiments here that XP should do you just fine.
The minimum specs are 233MHz and 128MB, so maybe disable as many services as you can stand, use the 'Classic' interface to reduce your memory footprint, and +1 for giving it an nLite shakedown.
Plus, your familiarity with XP means you know what to expect and how to use it as soon as it gets installed, so spare you some possible frustration.
I'd also go for the extra 256MB especially if you plan on keeping this laptop around for a while, every little bit helps to extend it's life.
As far as Free OS's, I hope you brought a can opener for those worms
You say you want something as easy as XP to install, and to be honest, I've had most Linux installs go much easier than Windows, even though they might seem more complicated at the time.
It's what you do after
it's installed that will be uncharted territory for you.
I agree many of the big-name Linux distros (Ubuntu, Suse, Fedora, etc.) won't be very comfy on what you have, but I had good experiences with Debian Stable
on even lower-spec machines.
Still easy to use, but without a whole lot of 'extra' to get tangled in (saving memory), and it'll have a full complement of drivers, so hopefully no issues there.
Just do a little reading to get familiar with Debian's "APT" software management system, and you'll be trying out writing tools in no time.
For low memory and speed requirements, I recommend Slitaz
I've ran them both on a 400MHz laptop with 128MB, and both ran very well, despite Eóin's comments.
They're both designed to run from a CD or USB so you can try them out right away, but can be installed very easily to the hard drive, which would save memory.
The tradeoff is there will be some learning and setup involved, which might be more than you want to tackle for just a writing machine, and especially since you don't have experience with alternative OS's, but it's there if you're game...