If it was mine, I'd buy a fresh copy of XP, format the drive to remove all instances of "bloatware" and problems, and install XP fresh. Keep in mind that you'll need drivers for your other "stuff" such as audio, video, modems, NICs, etc.
Or, you can just run the restoral CDs and uninstall what you don't need.
XP will run fine with 512 of RAM, and in a laptop, a Gig or more is overkill.
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My laptop (1.8, 512MB, 60GB), is veeerrrryyyy slow, so I was thinking of wiping the slate clean and reinstalling everything... After I copy all my important files to my external (lacie 250GB), what should I do? I have the boot up discs, but I want to avoid all the crap bundled with Sony. I don't need AOl, Messenger, Sony VAOI bundles, or any of that other junk. I really just want Windows, with MSN Messenger, and Office 2003 (I have the discs for Office)...
(Oh, I will be upgrading from 512MB to 1 GB RAM this summer... Should I wait until my new hardware is installed before doing the reinstallation?)