I would say it depends on how you're going to run it. Let's consider the following scenarios with only 96 MB RAM:
Scenario 1- iMac + Mac OS 8.6 + MacHTTP
- iMac + GNU/Linux + Apache (no GUI)
Outcome: Possibly a tie. You'd have more options with Apache than with MacHTTP. However, OS 8.6 would give you a GUI as opposed to the command line in GNU/Linux.
Scenario 2- iMac + Mac OS 8.6 + MacHTTP
- iMac + GNU/Linux + Apache (GUI)
Outcome: Mac OS 8.6 would be faster. Today, Xorg on GNU/Linux with a desktop environment would run quite sluggishly on only 96 MB RAM compared to Mac OS 8.6, even if you were only using a light window manager. That extra layer for the GUI on only 96 MB RAM would not leave enough for Apache to work with IMO. But again, you're faced with the limitations of MacHTTP.
None of this is scientifically precise, of course.
This is all just from my experience with the two operating systems.
As for a Linux/ppc distribution, Debian hands down. It just works on all PPC Macs that I've come across. Ubuntu, while much nicer, would not even install with that little memory and has been riddled with problems since 7.10. You can also try Yellow Dog Linux which is tailored for server use, but expect the packages to be even less current than those in Debian "stable".
You can also look into running Lighttpd (pronounced "lighty") instead of Apache. Lighttpd is much leaner than Apache and has been picking up steam in the last year or so. Lighttpd should be in the Debian repositories, so it's just a matter of pulling it with either aptitude or Synaptic (CLI and GUI, respectively).