Linux is just fine for 99% of what you’ll want to do, especially since all the apps (OpenOffice, etc) are preinstalled and preconfigured.
By default, the EeePC is in “Beginner mode” but you can switch it to use “Advanced mode” which is a KDE-based Linux desktop. This model comes with Xandros Linux pre-installed.
I have the 701 model, which has 4GB of hard drive space (basically a 4GB flash card), and 512MB of RAM. The Asus EeePC is an awesome little machine.