Hi,
For desktop Linux, I would recommend
Ubuntu. I use it as my primary operating system, and all my hardware worked first time, without me having to configure anything. For example, ATI drivers usually are a real challenge to install on most distros. With Ubuntu, you simply the 'xorg-driver-fglrx' and the 'linux-restricted-modules-386' packages, change 1 line in a config file, and it works.
In regard to applications, there are apps for most tasks. Gaim and Xchat for chatting with IRC, MSN, Yahoo, AOL, etc; OpenOffice.org for office tasks; Evolution/Thunderbird for email; Firefox for web browsing. There are also lots of games available in the package manager. You could also purchase Cedega, which allows you to run Windows games on Linux.
Just my 2 cents on this one :p