It's maxed out at 2 GB, but otherwise meets all your specs, I think. [link|http://cgi.ebay.com/IBM-ThinkPad-T41-1-7GHz-512MB-60Gb-DVD-CD-RW-XP-WiFi_W0QQitemZ290139733918QQihZ019QQcategoryZ140083QQrdZ1QQcmdZViewItem|Similar boxes] seem to go for $300 - $500 or so on eBay. I haven't looked at Lenovo Thinkpads as my next laptop will probably be a Mac.
There are some relatively cheap AMD dual core laptops out there (e.g. newegg), but I don't know what compromises they took to get the price down.
If you want something really cheap, you might look at [link|http://stores.ebay.com/Recycle4va_Laptops_W0QQcolZ4QQdirZ1QQfsubZ5QQftidZ2QQtZkm|Recycle4VA].
The next machine I get my Mom will probably be a cheap laptop. She seems to have issues with various peripherals having driver issues (I'm sure it's user error, but still...) - I'm hoping having an all-in-one box will lessen those issues.
Remember that if you want a new Lenovo/IBM box that there are stock-holder discounts... :-)
HTH a bit.
Cheers,
Scott.