The Semprons were the budget chip back then, so the PC won't be winning any speed medals! Should do the job okay though.
As long as it boots XP (which it should, I've built XP machines with 1GB RAM and Sempron chips and they run fine).
As long as the network/hdd combination is up to the task of copying movies etc, it should work well. From the overall picture I've gathered then it should work! Nothing to lose anyway, XP won't cost you anything as you already have a licence, and theres nothing to upgrade, so its worth giving it a shot!