I have an HP Mini (210-2145DX) with an Intel Atom and 1G RAM. Not quite the same as what you've got, but maybe close. I've been running a full desktop copy of SUSE on it since March 2011. (Yes, you read that right -- full.) I haven't had a single complaint, and because I installed the full system, not a pared down version of something, it works as I expected it to.

When I was considering netbooks I loaded a USB drive with a live-CD and used that to see if the computer could at least boot and run some flavour of LINUX.

The only issue that I had with the HP was finding the driver for the wireless 802.11 chip set. A bit of searching and I was able to download the latest driver and once it was in place all worked. Everything else worked 'out of the box.'

A link to SUSE if you want to have a go with that flavour:
Linux OS | SUSE Linux Enterprise

I'm not sure what chip set is in your model of HP; at some point in the next day or so I'll see if I can find the partculars for the driver I needed.