windows 7 or 8

Windows 7 32-bit might work, BUT you would have to upgrade the RAM/memory to AT LEAST 1GB - maxing it out at 2GB would be better.

Windows 8 would require a processor that supports NX/Execute Disable ... not all P4's do.  

64-bit would require a processor that supports 64-bit ... not all P4's do.  Your system does not support enough memory to make this a worthwhile upgrade (64-bit).

All in all, if you already have a valid, unused, RETAIL license for Windows 7, this machine might run it ok, but I probably wouldn't waste any money buying it for this system.

You might start by running the Windows 7 Upgrade Advisor to see if you will run into any problems with Windows 7:

windows.microsoft.com/.../upgrade-advisor

Windows 8 does NOT require UEFI.  Factory-installed (OEM, like Dell, HP, etc.) Windows 8 requires Secure Boot (part of UEFI), but retail installs do not.

This system works great with Windows 7 32 bit.

As mentioned above you should have at least 1 GB of RAM installed. RAM is pretty cheap so I recommend installing a minimum of 2 GB but preferably 4 GB.

As you are in the UK you may obtain RAM from these 2 places. Crucial is in general recommended for Dell systems but I have had many a good purchase with Offtek also which is slightly cheaper for DDR2 RAM:

http://www.crucial.com/uk/upgrade/Dell-memory/Dimension+%2F+Dimension+XPS/Dimension+5150-upgrades.html

http://www.offtek.co.uk/ram-memory-2/dell/dell-desktop-memory/dimension-5150-(dm051)/mid145289

They are sold in kits of 2 GB (2×1 GB modules) so to get the 4 GB of RAM you require 2 kits. You machine has 4 memory slots.

The crucial website also has a system scanner and will inform you what slots you have free and how much memory you currently have installed.

For the Windows 7 installation see Windows Reinstallation Guide/A Clean install of Windows 7: http://philipyip.wordpress.com/dell-community-forums/

I would advise installing Windows 7 using a .iso from Digital River (ignore Step 2 the system locked preinstallation as it won't work or apply to your system). Install this without a product key and you can evaluate Windows 7 for 30 days to see whether you like how your system runs before deciding whether you want to buy the license or not.

You could also try installation of the Windows 8.1 Consumer preview 32 bit also mentioned in Windows Reinstallation Guide/A Clean install of Windows 8. I personally prefer Windows 7 to Windows 8.1 and prefer that to Windows 8 but each user has their own preferences.

If you feel up to it you could of course evaluate both to see what one you like best before purchasing.

Driver wise likely everything will natively work with Windows 7 32 Bit with Service Pack 1 but for best performance install the below drivers.

For Windows 8.1 32 bit ignore the OS updates category and Dell System Software. In fact I wouldn't bother installing any additional drivers on Windows 8.1 it should have all the drivers inbuilt. Ensure you have the latest BIOS revision before installing Windows 8.1 however.

BIOS

A07

OS Updates

Service Pack 1*

* Not required if the installation media includes the Service Pack.

Microsoft Security Essentials

Latest Definition (MSE)

Internet Explorer 10*

** requires internet connection

System utilities

Dell Notebook Software

Chipset

Intel Chipset*

* Requires Internet Connection.

Video

Intel 82945G [Variant A]*

or

ATI AutoUpdate [Variant B]*

* This system may have a dedicated graphics card installed, check the Card slots at the bottom/back of the system. If no graphics card is there use the onboard Intel 82945G video.

Audio

Sigmatel Audio*

Creative SoundBlaster*

* This system may have a Creative SoundBlaster installed, check the Card slots at the bottom/back of the system. If no soundcard is there use the onboard Sigmatel Audio driver or use no driver (if you are satisfied with the sound quality).