FWIW I'm investigating using Damn Small Linux to run SoftSqueeze on a 147MHz laptop with 32Mb RAM. I've got it within a whisker of working for low bitrate internet radio streams. Now this isn't the server but serves to illustrate what's possible with hardware that Microsoft dumped 10 years ago and the right Linux distribution. This, and Puppy Linux, are true absolute minimum Linuxes (but with a GUI, decent HW support, packages and so on), although for me this is a recent expedition into the world of Linux so others may be better qualified to say more.
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