Aye, that's right. It includes Firefox, Open Office and all the software you need to do routine stuff like e-mails and making tea.
There's even a built-in webcam, and the keyboard is quite usable.
To give you some idea how bloated Windows is (and no, I'm not trying to start a war - this is just 'out of interest'
) backing up the system and all installed software on my (Ubuntu) Linux machine, including configuration files (but not data), takes up 1.5GB.
I have a complete disk image (again, excluding data files) on a 2GB USB stick.
Xandros has less eye candy than Ubuntu Linux and needs even less space, so 2GB is OK but I'd go for the 4GB version.