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Basically Celeron is a Cheapest alternative of Flagship Processors of Intel . Intel was able to drop the Price of Celeron Range of Processors by removing the L1 Cache from it .
If you application is Just Browsing and Simple Word Processing , Celeron is a Good Choice and Wallet friendly .
But If you are a Gamer or a Graphic Suite User , Then you can join People who are against Celeron .
No, you cannot exchange them. I was not able to determine what socket your notebook uses, but the 500 Mhz mobile Celeron was only available in two formats. One was Socket 495, which has no Pentium III processors available (only Celeron). The other is BGA2, which is not a socket at all, but is soldered onto the motherboard and is thus virtually unremovable.
Here is Windows Xp requirements:
PC with 300 megahertz or higher processor clock speed recommended; 233 MHz minimum required (single or dual processor system);* Intel Pentium/Celeron family, or AMD K6/Athlon/Duron family, or compatible processor recommended 128 megabytes (MB) of RAM or higher recommended (64 MB minimum supported; may limit performance and some features) 1.5 gigabytes (GB) of available hard disk space* Super VGA (800 x 600) or higher-resolution video adapter and monitor CD-ROM or DVD drive Keyboard and Microsoft Mouse or compatible pointing device
Find out the type of motherboard installed in your system and that will determine your upgrade possibilities. Check your manual or if competent enough open the case and should be a label on the motherboard telling you what type. Get the number and google for answer