We're running a couple of PIII's in production:
model name : Intel(R) Pentium(R) III CPU family 1133MHz
Each of these has 4GB RAM, but we're rarely using above 600Mb of it, the rest is cached.
These two servers have a network "load-balancer" in front of them (does nothing more than round-robining DNS requests at the two backend nameservers).
And we host >40,000 zones (yes I work for a DNS company
) - these servers handle these zones, and over 1 million queries per hour per server without issues.
EDIT: I also recommend Gentoo - once you use portage you'll never look back!
Cheers,
ZB