Hi,
I spent a few hours wondering why WinMX update wouldn't work on Win98 second edition, and now I know why- win98 uses "hosts.sam" and win2000/xp uses "hosts", and the installer was creating a file called "hosts" which w98 didn't recognise. I manually changed hosts.sam and it works fine again. So just make the w98/me installation amend hosts.sam and there won't be any issues with these OS.
Thanks,
Graham