I just installed Arch on a Dual P III 800s, 128 mb RAM. I had Fedora on it, but it's to fat for me. The problem I have is that it seems as if it has slowed down switching over to Arch. When I first started Arch it was smoking after I ran pacman -Syu and it just seems like it is getting slower. Any reason why?
Something has probably changed, but you shouldn't restrict your investigation to just the updates from pacman -Syu.
You might want to look at what applications and processes you're starting at boot time ... and are taking valuable resources are run time.
Check which modules you've installed; some may not be necessary:
Check what processes you're running in the default environment; some of these may not be necessary:
Given that you don't have a really large amount of RAM, you might want to see if you shouldn't switch to a window manager with lower memory and processing requirements. That tends to make even the memory/processing hogs such as Mozilla run better.
Also, if you're using some applications that require a lot of memory, you might be able to configure them to run with less (e.g., OpenOffice.org has a memory control option: Tools->Options->Memory).
There are a number of other very useful optimizations you can look to do. Check out the Arch Linux Wiki for more details.