XP is alive and well. It's on most of the netbooks that aren't running Linux.
Vista is not as bad as everyone says it is, but you need to fiddle with it in order to make it run with a reasonable turn of speed.
Linux would be able to do everything you want too, and would make the computer cheaper.
Incidentally, I've just bought a Samsung NC10, and it's brilliant. Runs for more than 7 hours on a charge. But if I didn't need Windows XP for the software for my OU computer degree I'd have bought one of the Asus EEEs that PC world is selling for £120.
As for undeleting your Itunes library, I don't know if you can get your music again through Apple but if not you could have a go with PhotoRec
EDIT - 2 replies while I was typing! Not really paying attention, Spinal Tap's just come on ITV1. Ram is the 1GB bit (RAM=Random Access Memory). 1GB is not enough for Vista to work well.