I am using a 1.6GHz Presario 2100 laptop with 496MB RAM (I know that sounds weird but it sucks up video memory) for development, and also sometimes a 300MHz Pentium II with MMX for development too. But she's slow because she has the IP router, Exchange server, IIS, FTP, Active Directory, everything. And on 208MB, I know I'm insane.
For testing I of course use both a evaluation copy of VMware (my clock gets set back frequently

), Bochs 2.0.2 and a Compaq ProLinea 4/50 486DX2. And by OS still boots in < 1 second, with IRQ handlers, sleep mode, timer, and basic keyboard functionality.
And eventually I'll probably test my OS on a Gateway P6-450. It's a P2 with no MMX (?) and 80MB RAM that I found laying on the street next to the dumpster, just shove a HD in it and it's good as new! No case but other than that I needed another computer anyway.
Andrew
http://www.GeoCities.com/AWOSDev *under development*