I've worked in IT support and my heart sinks and fills with dread when a customer tells me they are using 98/ME. It's simple is a crap, unstable and outdated OS.
NT 4 was bad but moving in the right direction, NT 5(win2000) was a lot better but long boot times were a pain, NT 5.1(XP) is much better.
I wish we could stop having to support 98/ME but then I wish we could stop supporting SCO unix too ( god that's a bad OS, I used it for 8 years before being converted to Linux ) we support AIX(32/64bit), HPUX(32/64bit), SOLARIS(32/64) plus a few more nix's, SCO is the biggest cause of server support calls and 98/ME is the biggest cause of client calls even though the number sites using 98/ME is dropping all the time.
You want a small, low overhead OS for games?http://www.damnsmalllinux.org/
just update the default video driver.
Also check out:http://www.knoppix.net/
Someone recommended Suse 9.1 personnal, I've been having network problems ( very slow lan transfers ) after updating a machine from 8.1 to 9.1 so I won't recommend it.
Suse 8.2 has recently given network freeze up ( have to do /etc/rc.d/network restart ), but I spent a good hour or so play Quake3 against my daughter the other day without any problems from my laptop running Suse 8.2. Previously I had no problems Suse ( from 6.4 up ).