Looking at your systems specs, I don’t see any reason why Linux would not run properly. Maybe some USB devices will give you troubles… but you can find out easily :).
About the shells: most (all?) distro’s come with the Bourne Again Shell, bash. This one works fine, nice and easy. I guess other ones, like the C-shell etc are available as well… I never tried since bash is great!
KDE or Gnome? Hard question. I think most ppl would say KDE… in most distro’s, this is standard. I however prefer GNome, cause it works a little faster for me.
If you’d install Redhat 8 with Bluecurve, it would be possible to switch between KDE and Gnome without really noticing that. The Bluecurve theme makes them look similar.
Other Window managers? Well fvwm is a nice one, if you can work with it. A friend of mine is really addicted to that one, because he doesn’t have to click a windows to activiate it (mouse scrollover does the trick).
I don’t think you’d go wrong with Mandrake 9. I did not try that one yet, but as far as I know, the new Mandrake seems to be very good (stable, fast). As it is based on Redhat Linux, you can use most/all stuff released for Redhat distro’s. That’s something that will come in handy if you plan to do lots of things with Linux.
Running Windows programs on Linux can be done… at least some. Wine is an emulater for Linux. It’s however a pain in the ass, since you need to map all files of the program yourself…
Luckily, there are some packages for Wine of some apps available, solving this problem a little… I know KaZaa is available this way.
Another way to run all kinds of Windows stuff from Linux is using VMWare. You van get a free demo from www.vmware.com… this program really works fine. You’ll need quite some memory, but 512MB should do the trick.
Just one more advice: if you are abled to, download Knoppix (www.knoppix.org I believe, I guess google an help you out;)) to see how Linux looks and works. Don’t be scared of the speed, Knoppix is slow because it runs from a CD (it doesn’t need to be installed, really great for testing Linux on a system(…