I can understand why you would hesitate installing it on your current machine. I was pretty hesitant to install it on my P1, 233mhz, 64mb ram, WinME.
But I finally did because I needed it for some things I really wanted to run.
Here are my observations and tips from that slow machine with both .net 1.1 and 2.0:
Some .net applications will slow down your whole system when they are starting up and they can take considerably longer to start, but once they get going, they are just as fast as any other application.
Sometimes if you are running quite a bit of stuff, when starting a .net application, it can put you dangerously low on resources and cause your pc to lock up. If you have an application like that, close some stuff...as much as you can, run the .net application, and then open the other stuff back up once it gets going. (same thing applies if you run a .net application and the window is full of black areas or missing parts)
I have had better luck running .net applications than most java ones. Java can be a killer on an old pc from application start to close...but .net is only a killer when starting them.
On an old machine like yours (and my dinosaur) I don't think I would have installed IE 7...I would definitely stick with IE 6. (there is no IE 7 for the OS I run on mine, so it's not even anything for me to consider)
If you are so hungry for the tabs you get with IE 7, you could use either Opera or Firefox and have them, and not have to deal with as much of a slowdown as you do with IE 7 & .net combination. I ran Firefox on my old machine just fine when I wanted to do some serious surfing...and ran a tiny little no frills browser
for opening a quick single page, the rest of the time.
You could wait and get a better pc before enjoying .net applications, or you can take my tips and attempt to enjoy them now. The choice is yours, but you will find that the longer you wait to get a new pc, the harder it is going to be to avoid installing .net.