I have been running OS X on a 300MHz iBook (the original iBook model) for about two years. Here's my recommendations, in order:
Get a 512MB memory stick. Goto
www.4allmemory.com You pick the computer you have, they tell you what compatible memory they have. There prices are in line with the other popular places.
Get OS 10.3 (aka Panther). Believe it or not it actually runs faster than 10.2 and it has "expose", a fabulous functionality to help manage multiple open windows. Performance of other built-in programs is also noticeably improved.
I expect you can't get OS 10.3 commercially anymore, so just google to search. I suppose eBay could be a good source. Or find a mac friend with the CDs. In any case, as a minimum you should upgrade to at least 10.2 if you can't get 10.3
Finally your hard drive capacity is a concern. Read this thread:
http://forums.macnn.com/showthread.php?t=280110
Basically, not only do you need enough room for your own files, but the OS uses HD space for virutual memory, gigabytes of it.
Other suggestions:
The eMail program that comes w/ the OS is horribly slow on my 300MHz iBook. Much more than any other program I use. BTW, It's performance was pleasantly improved in OS 10.3. Anyway, I was using the free Eudora email program that runs in classic mode (ie it's an OS 9 program).
When you install OS X watch for the "customize..." button. Here you can turn off the dozens of languages suppored. I selected only English and saved hundreds of megabytes in disk space.