Linux can easily be run on your 500 MB HDD, it can also be run from an USB stick or even a DVD.

Linux can even run on the original Raspberry Pi, a single board computer with only 512 MB RAM!

You should probably look for a distro that is made for older systems, but if you do that, it should work very well. There are obviously limitations with only 2GB RAM. So I wouldn’t use a resource heavy desktop like KDE/Plasma.