|"My objective is to create another entertainment center without cost'|
As you've been told, your system doesn't meet the requirements to run XP, so if you're not going to add more RAM, you can scratch XP off your list, Win2000 too. That leaves you with Win98, WinME, or a lighweight version of Linux.
If your Win98 disk is bootable, you don't need a floppy drive. If it's not, you can either create a bootable Win98 startup CD that can be used the same as a boot floppy, or create an entirely new Win98 CD that IS bootable. If you're going to install Win98, make sure to partition & format the HDD (FAT32) in advance. You'll probably need 3rd party software.