I'm afraid if you are planning to go XP, you'll need a bit more grunt to that laptop, if upgradable at all. Typicaly (although not always) Winxp needs P3 or greater, 128mb RAM (256-512mb recommended), and a bit more hdd space than that, if you want to install much programs or store anything on it. If you can get your hands on the 98SE then it should suffice..
But i wont rule out it wont work, just that it would be extremely unbearably slow.. even if you turn off those effects and eye candy..