If thats pretty much all you use it for, I'd get the drive Freeze recommended and just install JoliCloud as the OS. If I remember right, its quite a bit smaller than Windows 7 and should do everything you need. Or you could always do a dualboot, but I wouldn't bother if you don't use it for much other than media.
Uh, there is no need to install a smaller OS in a 500gig drive.