I've got a PII-300, with 64M ram running debian as my home server/firewall/etc., and it works like a champ. Your machine would be a step up from what I have
Of course my system also worked just fine when it was a P75 with 40M ram, so I'm not complaining.
I had also thought about donating it to the local schools, but they pretty much turned their nose up at it. At least around here it seems they have plenty of computers on their hands and don't need peoples toss-offs.