In order to purchase the OEM version you will need to also purchase a certain amount of hardware, microsoft do not specify exactly what you need to buy, but will it be any cheaper than the £80 you would need to pay for the upgrade version of xp?
your system will more than handle XP since the minimum is a pentium class pc running at 266mhz. I run xp pro on a celeron 600mhz laptop with 192mb of ram without any problems or "chuggin'" but some users who either don't or don't know how to configure or setup their systems correctly and efficently may have problems (oh and I'm a qualified electronics engineer C.ENG so should be ok)
I expect your refering to unsupported drivers, true, however in my experience these "blindspots" have been blown out of propotion. I find my little "old" laptop's peripherals actualy work better/easier (to install) under windows xp. Don't believe everything you read (except this!)
I run a P3 1Ghz win Win XP installed - never had any stability issues.
Although like madboy I do have far more memory than the norm - 640mb RAM. And I agree with oneMegaBit insomuch, that many user don't know how to configure their machines properly and consequently run into all sorts of conflicts and errors.