Hey Stinky,
You should only use Win2k or XP Pro as your operating system if you're developing .NET
you may not be thinking about it now, but if you ever want to try your hand at ASP.NET applications, you need an operating system that is running IIS, which limits you to Win2k or XP Professional. 98 and ME have no support for web applications.
I was developing on a P3-500 with 128 MB of ram, and it ran super SLOW! Those minimum requirements are definately minimum. I'm running an Ahtlon 1400 now, with 256 MB of ram, and I'm pretty happy with the performance. The faster the system you can get, the better though for sure.
Jack