If you're going to have to buy a new CPU and new RAM, then there's no point in sticking with socket-7.
Duron 600 or 650 is only a few bucks more than a K6-2/500. Total extra cost of going with a Duron solution is only around $30, which would definitely bring a lot more speed, and some degree of upgradability which the K6-2 system wouldn't have.
Good K6-2 system (in Deutsche Mark, just for comparison):
190 - DFI K6XV3+/66-2 (most advanced SS7 board)
160 - K6-2/500
30 - decent fan/heatsink
30 - very basic sound card
410 DM total.
Good Duron system:
260 - DFI AK74SC mainboard (no-nonsense mainboard, sound integrated)
180 - Duron 650
40 - decent fan/heatsink
480 DM total.
All other components (RAM, case, etc.) would be the same cost. So if you can scrape those $30 together somewhere, then make the jump.
Regards, Peter