You totally want a new OS. That rig will probably see a 150+GB harddrive in its lifetime and you'll want to be able to use it. Plus security, and support reasons... and XP is the bomb-diggety compared to win 16-bit. Or maybe 2k if you're into the server side of stuff.

Make sure to get XPpro if you're using multiple monitors. 2k and 2k3 work for that too but it's kinda rickety.