Hit Ctrl-Alt-Delete, and open your Task Manager on that dedicated machine. I'll bet it's totally out of memory. Win2K/XP generally uses 100Mb or more as soon as it's started up, so that's before you run any programs, or the game server. With a program running, or a couple gamers connected, it will be well over 128Mb of RAM.
If you can find some RAM laying around, or can spare some from another machine, stick it in there, and give it another try. Your server isn't going to stand a chance when it's using the HD half the time. You could also disable as many services as you possibly can (only if you feel confident), since it's only serving that game anyway. No need for extra crap.
Otherwise, as far as speed, the Celery 400 should be just fine for quite a few people.