If it were not for the 74GB drive, I would have said 7.6 as it is more stable and a lower RAM footprint.

In this case with the 74GB, it makes it more complicated due to the HFS block limitation.  Perhaps with that capacity on such an old machine, it would be better to ignore the HFS limitation, and make multiple large partitions like 10-20GB, and load them accordingly.

It wouldn't hurt to have a 8.1 install as well, should you have any software that requires it.