I've been using my old computer for backup, but it's a pain to fire it up and actually transfer the files. I don't want to leave it on all the time due to the electric bill.

I'm looking at external hard drives, costing ~$100 US, or a hard drive enclosure for ~$20 US but then I'd have to buy another hard drive, OTOH, I'd be able to use the drive in a computer if the original computer drive craps out. On the gripping hand, there aren't any hard disk enclosures available locally and I don't have a credit card to buy online.

If you still want to do this, why not just plug some piece-of-crap monitor into the onboard graphics port and turn the monitor off when you're not using it?

If all you are using it for is storage, then just put some Ubuntu flavor on there. Go in with nautilus and set a folder to shared. It shares folders with Windows just fine, and it will be much lighter on resources than Windows doing the same thing.

Once you got it set up, just remove the monitor and kill any excess graphical and audio effects that you obviously won't be needing.

EDIT:
Neil, has a point. God made NAS for a reason, but my method takes like 10 minutes after OS install and costs nothing.

Neil! Calm down! Its just NAS, man! Put the router down! Slowly...

I would suggest a Debian stable base system (no desktop). It is intended to be a robust server environment and probably one of the best, if not the best, server Linuxes available. No desktop means no resources wasted on expensive abstraction layers. It's going to be headless anyway so what would you need a desktop for?

Of course, interacting with Windows will be fun to setup. There are Samba server packages available, but I have never configured one so I can't advise you on that. If you haven't done this before then you can expect to require some reading and experimentation before you get it working. If you have a bit of spare time to waste trying then it shouldn't be a problem.

You don't need a Windows SSH client with X tunneling support because again you shouldn't bother with a desktop on the server. It will be wasting resources most of the time. Most Linux administration is done from the command line anyway. You'd find yourself running a GUI just to launch a terminal emulator. Regardless, PuTTY should be fine for an SSH client; though you can instead install Cygwin and use openssh instead if you wish.

If you've never used Linux before then it's going to be a big learning curve. Using something like Ubuntu might be easier, though it'll also be more bleeding edge. Not to mention wasteful. I imagine that it should still run fine on those specs though... Still probably leaps and bounds better than Windows.

I would not expect a Windows server to have up times exceeding weeks at a time. You don't really have to reboot Linux normally. You can if you want the latest kernel running (probably a good idea, but not strictly necessary). My server has currently been up for 215 days. Good luck achieving that with Windows Server. Of course, I should reboot for the kernel, but it's probably not dire; and it's just a hobby server with no users so I find it hard to justify resetting my uptime.

For my workstation I have found Windows services not starting up automatically like they should, and upon complaining about it our system administrator remarked, "Now you know what I have to put up with." Windows is just not a reliable server platform (or reliable platform, for that matter ).

Thanks, for all the info.
I think i'll try with some Debian flavour, wish me luck, i'll need it.

In your situation I would go for Windows Server Essentials.

Thanks, i'll keep it in mind!

I'm not really sure the hardware would be be able to handle it

Update: my father asked me to connect it to the television screen so that we can watch family movies and photos.
I think this means i actually need some sort of Desktop envoirment, right?

Thanks, for the info, seems nice.

Or even get a dirt cheap streaming box. You can find them for $100 or less these days.

That box may not be enough to play back some media. And I'm willing to bet it doesn't have digital outputs that your tv can handle. Unless your tv is just as old, then all you get is svideo or composite.