1 gig ram should be plenty for Win XP. Heck, it's snappy with 256mb if you don't multitask too much. With such a tiny screen, you shouldn't anyway.
There's no magic app that'll speed up XP except maybe updating the video card driver. You can try installing Linux on it. But, I doubt that's an optimal fix (or maybe it is if you don't mind switching to Linux apps).
If you have two* physical hard drives (not partitions), you can try moving the page file away from the system drive (drive with the OS) into the other drive and make the page file permanent (the same size). That one's worked for me all the way back from Windows 3.1.
You can also disable/uninstall any app running in the background that you don't need.
The only other option would be to get a proper laptop if you plan to do more than just surf the web or do very light office work which was the original premise of the netbook.
I went to Best Buy earlier and tested every single one of the netbooks (ASUS, Dell, MSI, HP, Acer) there. They all seemed to be pretty snappy when surfing the web and/or using the webcam. The one with Vista (Dell?) seemed just a tad slower, but not enough to bother me.
*Every single one of my computers (except the Macs) have two hard drives installed. Internally for the desktops and externally via firewire for the laptops.





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