I've run KDE2 on a similar computer and it's a resource hog. Slower than W2K.
For a window manager, blackbox is nice. Have a look at xfce, too.
Either of those should be snappy and stylish.
If you haven't already discovered it, xmms is a winamp clone. You can even use the multitude of winamp skins.
I assume you haven't touched the init scripts, so you're probably running all manner of services you don't need.
(sendmail, apache, rpc) ('ps aux' to check)
I'm not too familiar w/Redhat, so someone else is better able to help you with that.