With those specs, any distro will work -- on the command line. It becomes more difficult when you start throwing "heavier" apps into the mix. This is because Linux is more RAM-sensitive than CPU speed-sensitive.
If you want to run in a GUI-type enviroment, there some lightweight window managers and other lightweight apps. So running KDE or Gnome, is probably out of the question, even if they actually would process. However, something like blackbox, or fluxbox, or openbox, or fvwm, would work as a window manager. Lighter apps like abiword might also work out O.K.
If it is at all possible to up the RAM to something closer to 64MB, it would be good. On my IBM P120, when I went from 40MB to 72MB, it was like night and day (of course, that also involved a BIOS update).
Check into the
Linux On Laptops site and check the list for your model. There may have been other success stories.