When having a word document, music, spreadsheet and surfing the web, I could almost break the 100 MB line I wanted to break (I came down to 108 MB RAM usage IIRC) while still looking good enough with some conky eyecandy etc. This took of course time, patience and some magic linux wizardry. Also, it was very stable (probably thanks to how minimalistic I made it). You could try to install a minimal Ubuntu although there are many minimal options for you to play around with.
https://help.ubuntu.com/community/Installation/MinimalCD
Just go from there and install all you need, and tweak it along the way. That'll greatly benefit your netbook. Also, be prepared that you may need an ethernet port as minimal CDs rarely comes with wi-fi drivers.
Really, it's not hard to do. Look up what software you want and need, apt-get install them, and aptitude/apt-get will take care of package dependancy and other stuff for you.
I'll try to see how good I can make it now through a virtual box. I'll keep you posted on what I did as well as provide a nice screenshot for you.
Just installed openbox (apparently it comes with lxde, you might want to try fluxbox with tint2 instead - could be a bit more lightweight), xorg (actually this is the one I first installed), abiword, midori, gedit (for a nice, functional, lightweight text editor that is graphical instead of command line), htop (this you will want to have), and guake for a great terminal emulator and last but not least lxdm if you wish to login graphically. You could scratch that and login via command line and just use startx to get to your desktop environment. With nothing started as you can see I use 65 MB RAM. With Abiword and Midori with a few tabs open, Head-fi for instance, it goes up to 139.
From here you just build on it.
This is a LOT better way to learn about linux than just installing a fully fledged distro. Also, this is a LOT easier than doing a linux from scratch and so on. This is sort of a middle ground between newb-friendly and quite advanced. Also, you get your system just the way you want it to be, and it's pretty darned lightweight even for a netbook with very limited hardware capabilities. When I had my 10" EEE I preferred this method a lot over the conventional ubuntu netbook editions and easy peasy linuxes and their derivatives that builds upon the somewhat RAM heavy Gnome environment.
https://help.ubuntu.com/community/Installation/LowMemorySystems
That is a great page that explains most of what you want, but it adds things you don't need, like a login manager (it isn't that hard to login textually and just start X server by typing startx).
Happy linuxing
BTW. This is how my linux looks now, LOL, a memory hog. But on my desktop RAM isn't exactly a rarity, so I haven't even cared about doing anything other than adding new DEs to try them out. Meaning, I have a lot of redundant stuff on it. I might just have to do a minimal install on it this weekend and start from scratch instead.
