I run Gentoo, but would suggest that a source-based distribution is not the best of ideas with a Linode.
For one thing, the updates requires compiles, which can be rather taxing on a Linode -- memory (especially this!!) and CPU. Not much I/O hit. It's not much fun compiling large stuff like glibc on a "150 MHz" system.
I would suggest a binary-based distribution with excellent package management systems and widespread support, such as Ubuntu or Debian. (Ubuntu is roughly described as Debian with newer packages, in essence.)
I've run RH, Slackware, and so forth for a long time but am less fond of them now. Ruined by Gentoo/Debian/Ubuntu, I'm afraid.
Not as familiar with SuSE or Mandrake but have heard that Mandrake is great for the desktop, and SuSE being respectable.
With respect to Gentoo on a Linode, I don't believe you recoup your "time/resources investment" by compiling everything. You lose much more time spent building things than what little you gain from a slightly optimized binary running on a virtual machine.
The only real reason I run Gentoo is because I'm most familiar with this distribution at the moment. But if I could redo things, I'd personally probably go with Ubuntu on the Linode.