I think it's now a trivia question: What is the slowest SSE2-supporting (32 bit or 64 bit) processor. (Or, "What instruction sets does Steam really require?") I'm sure whatever that CPU is would be able to run either Vista or 7 for steam, since 7 can run on a Pentium Classic. At least, I think Steam works on Vista just fine. I know people were discontinuing Vista support at the same time as XP but it differs so little from 7 that it could probably be coaxed into working.
I've heard about software SSE2 emulators before but never seen one, so if you could find one of those and run it then you could maybe run Steam on a Pentium 60 if Steam wasn't looking for other instruction sets (SSE1?) that it would lack.
P60 (No MMX, no SSE2, single core) (supposes SSE2 emulator exists and works, and steam requires neither MMX nor SSE). Slowest CPU 7 can boot on?
PMMX 166 (MMX, no SSE or SSE2, single core) (supposes SSE2 emulator exists and works and steam does not require SSE1)
Cyrix 6x86MX PR166 (MMX, no SSE1/2, single core) (supposes SSE2 emulator exists and works and steam does not require SSE1)
600MHz Duron XP (MMX, SSE, but no SSE2, single core) (supposes SSE2 emulator exists and works)
1GHz VIA Nehemiah C5XL (SSE, MMX, single core) (supposes SSE2 emulator exists and works) (sounds faster than it is), Socket 370 platform with 133FSB and option of using SDRAM.
\/ technically compatible CPUs, but not sure which is slowest.
Opteron 140 (1.4GHz Athlon64-like, one core. MMX, SSE, SSE2, 3DNow) 800FSB. Fastest memory: PC3200 DDR1
Intel Atom 230 (1.6GHz first-gen Atom, SSE1-SSSE3, 64 bit, hyperthreaded single core) 533FSB. DDR1? DDR2? not sure.
1.3GHz Willamette P4 (MMX, SSE, SSE2) 400FSB. RAMBus only? Are there socket 423 motherboards with SDR?
Eden-core VIA CPUs (as low as 400MHz)
VIA Eden CPUs with the Esther core come in frequencies as low as 400MHz and support SSE1-3.
If you can find an Eden 400 that's on a motherboard that can boot Windows 7 then that might be the winner if Steam's instruction set requirements truly are set in stone. I don't think a 1.6GHz Atom or 1.3GHz P4 could possibly be slower.
If SSE2 isn't a hard requirement (whether that be by launcher tweak or SSE2 emulator) then the 1GHz Nehemiah could maybe be slower. If SSE isn't a hard requirement, then a 6x86MX / MII would probably be the slowest. If MMX is not required, you could run it on the slowest CPU that can boot 7 (P60? K5?)