Glad you got the pics. It does sound like a dodgy hard drive being a bit hit and miss when transferring files.
1gb should be fine, though i wouldnt expect it to work miracles it will be noticibly faster than xp.
I did actually run a vm in ubuntu loaded with windows 7 and was running both adobe illustrator and photoshop at the same time. It did struggle at times and i kicked the arse out of it but i was rwally impressed how it managed all that on less than 2gb.
When you get it up and running stick libre office on it. Its as close to ms office as you will get and loads all ms office files.
You can also change the gui of ubuntu kinda easily, but i quite.like the default unity gui although finding programs can be a pain as its not like start menu on windows. Use the very top icon on the side bar.
Something else to consider is disabling the amazon search scope if its not been done by default already. there was talk of it being removed in new versions of ubuntu, the community didnt like the idea of amazon getting their keywords in that file/program search on the side bar.