Anything that has a smaller footprint will sacrifice features to do it. That's about it.
This laptop is old and needs to be replaced with a new one. You can find one that is many times more powerful for very cheap now.
1GB of RAM simply doesn't cut it anymore. Just my browser having this window and a tab for Bing open is currently using a little more than 0.5GB of memory right now - and that's not counting what the system needs simply to run.
While you may find OS's that will run decently on it, opening any more than a few extremely light modern applications will max out your memory and cause the system to use your page file. Your page file is virtual memory on your HDD, which in this case would be an IDE 2.5" HDD - the fastest of which topped out at 20MB/s data transfer speed.
Basically, as soon as you open any apps, your system will grind to a standstill waiting for HDD I/O, and there is nothing you can do about it.
A Linux distro such as CrunchBang takes up a small footprint, but it is difficult to use because of its lack of features and modern apps are still just as memory hungry, no matter the OS. Windows 7 and 8 scale well to whatever hardware they are installed on, automatically enabling or disabling features depending on what's realistic. Again though, modern apps still use tons of memory.
TL;DR - There is nothing you can do to make that lappy even remotely realistic to use for the average person who "just wants to do x". He (or one of you guys - his friends) will need to cash out for a cheap new one, or donate an extra rig you have lying around to the cause. If you're like me, you probably have at least one.
