XP Home. Or if you are scared of it, then take 2000, but there's absoluting nothing serious bad with XP Home. The best OS avialable IMO. As for compatibility, XP is definately better than 2000. It's not significantly better, but XP does 2 things with app compatibility:
1. Future applications will be written directly for it unlike all the apps we try to run on 2000.
2. Compatibility mode, and general improvements in compatibilty let XP be more compatibile with todays apps.
Actually, Windows XP is really Windows 2000 2nd Edition. XP did get a nice boost in ease of use, GUI, and APp compatibility but I think you need to understand that they are both built on the WIndows Engine (ie NT Kernel) and both are very close in app compatibility, but XP definately has the edge, and will get a bigger edge over time. I would not be too worried with compatibility hardware wise, but I would check out app compatiblity if you use older apps just to make sure, but it should be fine. Let me put it this way, Microsoft wouldn't have been able to release Windows XP unless it would work with the majority of new software. (sorry for rambling on

).