Personally I would say the E3120 would be a better processor, not only because it a newer processor but the fact that it has got a greater cache of 6MB and also can support upto 1333Mhz fsb.
Please remember this is a dual core processor as well and since you will be using 1GB of memory, you will be able to achieve the full 1333Mhz fsb using compatible and supported memory configuration for your system.
As far as I know the dual core feature can also be disabled in bios, it may also depends on which platform you will be using it.
Concerning the operating system, it does really depends on the processor, it rather depends mainly on the board.
Hope this will be useful information to you.