128 MB RAM on XP will be OK, not brilliant. But turning off background and the blue & green fisher price look will knock off nearbly 10MB of memory usage straight away.
Also turning off services which you know you don't need helps a lot too - especially junk like remote registry and windows time.
At the end of the day it kind of depends more on the actual software you use. After all the typical software that people use nowadays, like office, firefox, msn messenger, antivirus etc. has much higher memory requirement than the versions used 5 years ago when XP first came out.