Funny that you mentioned the P4 1.8A - my dad's previous computer had the exact same CPU. And like you, I found it to be a bit of a bottleneck when running anything like Flash or many tabs at once, even without Flash. The thing is, I think the i845 board supported up to a P4 2.4GHz 400FSB, so assuming I upgraded the CPU to that for say 10-15 bucks, I think it would have been fast enough to be acceptable (33% faster clock speed, so I'm guessing roughly 25% faster overall). And by acceptable, I really do mean "good enough" (I'm typing this out on an AMD C-60 running at 1GHz, which I find acceptable - and surely a 2.4 GHz P4 is at least as fast as this CPU).
So again, the limitation would fall on the 2GB of RAM, which I consider to be a bit of an issue with Windows 7 (this netbook has 4GB of RAM... if it had 2GB, I probably wouldn't find Windows 7 to be tolerable). I'm not basing this conclusion on experience with 2GB on a Windows 7 system though - I'm just assuming it based on having used Windows 7 on 3GB and 4GB systems only.