I'm a hardcore gamer, I use my system with just about everything imaginable. As long as you keep the "junk" background programs to a minimum (messengers, firewalls, etc.) You shouldn't have a problem. I'm able to run all of my games in their full blown graphics settings and still compile code textures in the background while I'm downloading music from the net, with a firewall and anti-virus protection running.
It's mostly in how you configure your system, and of course 128 MB of ram isn't going to cut it. One other thing, XP Pro has the same exact "junk" as XP Home, the difference I saw was you get multiprocessor support and some other things that really don't justify an extra $100 unless you're a business and can afford it.
My system specs
Soyo Combo kit w/ 1GHz Athlon T-Bird (non-OC)
384 MB PC133
40 GB Western Dig. ATA100 7200 RPM
ATI Radeon 8500 64MB DDR
52x CD
40x24x40 TDK Blue CD Burner
SB X-Gamer soundcard
5 Fans for cooling
350 Watt PSU
As you can see it's all in your configuration, software configuration that is. Jay
"Jeezus-sqeezits Bob!"