Off course, there is no correct answer - it all depends on what they want to do and what their needs are. However, I will summarise my replies to all those questions here:
The Xandros it possible shipped with? There is an unofficial upgrade avilable for it as well these days.
I have really good experiences with PupEee - a puplet based on Puppy 4.2 with all the drivers for the 70X and 900 series Eees ready loaded. It simply works as advertised, right out of the box.
Breeezy is an even more lightweight puplet for the 70Xs and 900s - I got good experiences with that as well, but like the more polished look and feel of PupEee.
Lately I've been having some fun with BrowserLinux (nee BrowserPuppy) - an OS with no frills and no thrills that has the drivers for the older Eees preloaded. If all you do is surfing the web, you can do a lot worse than looking at this 69Mb distro.
Off course, there are many more - even more than what that link mentions.
This blogpost may be added to in the future as I experiment - there are more distros out there I want to try out; Easy Peasy, possible eeebuntu, maybe firefly once they are out of beta. Got to love the Live Distros these days =)