Earlier quoted context omitted.
I run Arch on my $175 eee PC and it works far better than any of the other distros that I've tried. It also helps A LOT to run a very light weight window manager. I've found the StumpWM (as a bonus written in Lisp) is a great fit, although Ratpoison would be good as well. Another advantage with StumpWM or Ratpoison is that they don't draw window borders and there is no task bar etc, so you have quite a bit more space…
Have you tried Debian? I run Debian on a desktop, but my sense is that its hardware support for netbooks lags a bit. I'd be interested to know how easy it is to get working on an Eee PC. (And the OP might as well: a Debian base install seems like it might be a nice compromise between the kitchen-sink approach in a base Ubuntu install and the configuration required by something like Arch -- though I don't really know.…
Unless you really need capitol S Stability, I would recommend running Arch, assuming you're comfortable with a unix environment, or willing to learn. It's a very clean minimalist distro, and there isn't very much to wrap your head around that isn't just common unix stuff.