You usually see major differences when you majorly deviate from the default kernel. In this case, we've gone with an i686 kernel...so probably you won't see too much improvement with your pIII (imho) but you would see an enormous benefit let's say if you had a dual core intel 32bit next gen proc or even an atholon amd(32) core in the later gens. See where I'm going with this?
I personally always recompile as I don't mind taking the time to set the specific arch, mem things, which modules I want built in (strip all unneeded) etc etc. This is also due to the fact that I'm crunching loads of numbers (emboss, diff equations, rna structures, etc) and high kernel/proc/mem intensive jobs constantly and I need a smooth production stable system.
The problem with having a livecd/dvd is that we have to make the kernel a bit bloated to take into account all the different types of hard ware etc. So while you may see a difference, it won't be truely noticable until you get into some heavy kernel work. But like Dio said, a smaller kernel is a happier kernel
Hope this explains a bit more