I did not know that the machine was THAT slow...
As Quad and Mucks said really...
I think you should look at the situation and see that ok if you install XP on it, it will be horrifically slow, or unusable. And you need to think about what if your friend is dissapointed with this, it's not going to look good really.
I installed XP on a Dell Dimension XPS 700T - 700MHz P3 CPU, 128Mb RAM, 36Gb 7200rpm HDD, Riva 32Mb TNT2 graphics.
Absolutely useless. Took about 5 minutes to boot up and you could go and make a cup of tea waiting for the desktop to finish loading, and then application speed was undescribably slow.
Bear in mind it will run at its fastest speed right after you install it... the more programs that are installed, the slower it will run.
Your friend needs to decide whether the system is right for the iPod - i don't know what type of connectivity it uses but she can say goodbye to the idea if its IEEE1394 Firewire OR USB 2.0... Does this one even have any USB 1.1 ports? Ipods certainly aren't serial...
Also, a 40Gb MP3 player...run from a computer that will have about 4Gb of free space. Transferring files/ripping CD's will be incredibly slow due to the frequency of the CPU, and the speed of the hard drive itself UDMA33. 16 Mb per second is nothing, compared to todays standard of 150 and the future 300Mbps SATA 2 - Even with such drives, moving files around can take time.
I think that at the end of the day your friend will find this move highly impractical and you should advise her to save for or buy an entry level desktop system with a faster CPU, more RAM, a BIG and faster HDD and of course, Windows XP.
Hope this helps
Regards
Chris