In my opinion you don't have to force yourself to put Vista on. As long as you have a legitimate copy of a Windows Certificate of Authenticity for the operating system you are running then you should be fine. At some point if your computer lasts long enough or can run it you will have to upgrade to a new operating system at some point. But this is your choice. If it was up to me I would still be running 2000 on my machines but the support and software began to become outdated.

As for buying a sticker it says right on the Certificate of Authenticity that it's illegal. If you've got some extra cash laying around (which I know most people don't now-a-days) you can pick up a upgrade or a complete new OS install for fairly cheap.
As far as free operating systems go I would say that they are worth a try. When I tried Ubuntu about ten years ago it was very sleek and suprisingly user friendly. The only draw back was the fact that you had to use a CLI (command line interface) to get anything done. Now at this point they may have switched over to a GUI (Graphics User Interface) which is like Windows where you point and click. So in the end it comes down to what you want to do. I enjoyed Ubuntu because when I used it I felt like I learned a lot and it wasn't that hard to catch onto the command interface. But if you are building a arcade do you really want to take the time to learn something else while building your arcade....
In the end my idea is the following...
1. If you are using it for an all together day to day machine switch to XP or 7 (even Ubuntu if you want to learn). Look on online for the best deal on a new Windows Certificate and you can find tons of how-to's to help you install.
2. If it is going to be part of a Arcade use XP. It is going to require less resources to work and still has updates. Don't be afraid to spend a little bit of money on an operating system. They last you 5-6 years. And if you run into another situation like this you can transfer the OS to an older computer if you have a new OS on a new computer. I know this contradicts what we said earlier but as long as you have the OS on one computer you should be fine. My version of XP has gone through about two computers I have owned. And as many computers there are out there I don't think any one will come knocking down your door for moving operating systems around to another computer.
Hope that make sense. I tend to rant. (

). And don't be afraid to ask questions when you finally decide what you want to do. Edison once said that it took him 2000 tries on how NOT to invent the light bulb.