After hours of reading, numerous fresh formats and installs, with various OS. I feel I have a simple answer.....
*Jolicloud or Ubuntu 10.04*
Ubuntu 11.04 had screen resolution issues, i tried all the fixes, drivers etc. (IF anyone has cracked this issue, pls pls create a thread and describe your process in laymenís terms)
Ive run Jolicloud as an OS for circa 10 months, the dev guys just keep making things sweeter and sweeter. All very quickly too. Even reply to tech question on the day!....however, the reason i started to play around with other OS's was that i was getting bored of the JC interface. i even put cairoDock on. Ive read its running on Ubuntu 10.10, however on the official website on version 10.10 is not listed 10.04 was.(yesterday)
Everything that needed to work, worked. Screen resolution, GMA500 chips set, my levelONe usb network card (which I highly recommend) etc etc etc.
But honestly I think we need to up the Ram to the 2gig max. Then retry Ububtu 10.10 and 11.04.