Dunno about the CPU in the Key Lime, but I've installed OS X 10.3 on the original 300MHz iBook with 512MB of RAM, and while it's doable, it's not exactly a joy to use. It's a little more painful than I remember it being on my Beige G3/300, probably because of the smaller cache. The 800x600 screen doesn't help any.

/edit/ http://lowendmac.com/pb2/firewire-ibook-g3-466-mhz.html

adds key lime as an alternative to graphite. It replaces the 366 MHz G3 processor with the new G3e running at 466 MHz. The G3e includes an on-chip L2 cache that runs at full CPU speed for improved processor efficiency

Click to expand...

In which case, I say OS X all the way! That's 133MHz faster than the 'book I'm using right now.

//edit// http://lowendmac.com/pb2/firewire-ibook-g3-366-mhz.html

key lime. / newer G3e running at 366 MHz, which includes an on-chip L2 cache that runs at full processor speed

Click to expand...

Even then, probably worth a try