Yes you can install Linux on the 20GB and in fact using GRUB or LILO (the two boot loaders available w/ your prefered Linux distributions) you can actually have both Linux and Windows on the drive and “dual-boot” them.
You can read the files on your NTFS volume under Linux however since the NTFS file system driver was developed using reverse engineering and other trickery there’s a risk associated with its use. To access that data from Windows XP clients you’ll need to setup samba and share the folders as you would on a Windows box.
For what it’s worth I’ve found Linux/Samba to be a perfectly good, scalable and safe alternative to a Windows file server. In addition Email/Web products like cyrus and apache make it well suited to those functions as well. If you do it right you can even authenticate the linux services using your Windows user account credentials.