Your answer could be Debian. With a minimal install 100MB should be more than sufficient. Exim, which is the default mail server is also very easy to configure. Infact, on installation you are asked a few easy questions and lo behold it works!
Thanks guys I'll throw one more spanner in the works, I can't attach a cd drive to the laptop. So I was looking for a single floppy distro or something.
Amol