Most of the OS options that I can think of are aimed a bit older than that.
Qimo bills itself as a kid-friendly (age 3+) Linux distro. It works as an installation or a live CD. It is Ubuntu-based. Doing a little digging, it looks like it uses XFCE as a Window Manager, so it might run on such old hardware. (Modern versions of Gnome and KDE really don't.)
Sugar was originally developed for the One-Laptop-per-Child program...so it should run on just about any hardware. The targeted age range is K-6.
Edubuntu is an official Ubuntu derivative. It has many features (at its core it is still Ubuntu) and you can add programs for kids from age 2 all the way through things that are targeted for high school. I doubt it will run on you hardware, though. By default this distro uses Gnome 2.31 which is not particularly old hardware friendly.
Linux KidX is (according to its SourceForge page) "educational software suite that contains several educational games for children from 2 to 15 years old. Default language: Portuguese." I presume that you can change that easily enough after installation.
Forsight Kid's Edition is, as you might have guessed, based on Foresight Linux and is configured with many kid-friendly apps. This one is Gnome-based and a rolling distribution release so it will probably not run well on your hardware.
I knew about the first couple...but supplemented my notes from:
http://www.brighthub.com/computing/linu ... 43224.aspxIf you have a Linux distro that you like, or are familiar with, you can probably look at the packages that these install and add them to just about anything. Qimo would be the place that I start. You can probably add anything that Ubuntu has that Qimo lacks be default pretty easily. And Ubuntu is a large enough distro that you can probably get most software pre-built rather than needing to build from source (a somewhat slower and more tedious process on old hardware).