Well, if it makes you feel any better, my laptop with the VIA C3 1.2GHz and 256MB DDR266 RAM handles word processing, browsing, downloading, video-playing, music-playing, DVD-playing fine, and light multi-tasking is achievable.
However, you'll probably need to make some adjustments. Install a trial version of TuneUp Utilities 2006, cause it can help you optimize your machine. Also watch the visual effects, desktop background, screensaver, running services etc. cause they all take up extra RAM and CPU resources, which you haven't got many of.
Still, it's a lot better than my laptop!