Hi, first off, appreciate that older PC's will be more trouble than they're worth when it comes to getting Linux working on them. 1Gb of RAM now costs next to nothing for most machines so trying to get something working inside of 256M, although it can be done, it's simply not cost effective in terms of time. Go spend the fiver on a memory upgrade and many of your problems will vanish.
If you want a smaller footprint, take a look at systems based on XFCE rather than "Gnome".
You might find this interesting to play with;
http://www.knoppix.netNot used it in a while, but I think it used to give you the option of running XFCE ...