You can get either XP or Vista (with tinkering) to run, but of the two XP takes up less valuable memory and runs faster on the Eee's little 666Mhz processor. Mind you (despite earlier comments), I really don't have an operating system religion or crusade (I have four Windows
systems in the house, a Mac, and Linux system, too) , but I don't think running Windows XP/Vista is a great choice on the Eee. It's not that the OS can't run on the Eee, but that almost any Windows-compatible application you buy these days seems to think that RAM, disk space and CPU are unlimited resources, and on the Eee, they just aren't.
This isn't true of every Linux app, but most Linux Open Source groups do tend to put out tighter applications, so you can fit both the operating environment and a tassle of open source applications into the 4GB built-in memory space of the Eee. I find that's kind of nice because that way I can soft link my 8GB SD card in as the "My Documents" folder and store all the text-based files I've ever created/saved plus all the digital photos I've decided to keep on the SD card. Then, when its time to back everything up I just plug it into my Windows laptop and sync the files using FolderMatch. The only thing I don't have space for are my videos and music files.