Windows 98 SE is hands down going to be the best OS out there. It will run just about anything you can throw at it and if it doesn't then all it needs is some tweaking and they'll run. The one exception to this is for games that are time sensitive (meaning that they'll only run properly on a slower speed processor and nothing else. For those you'll need some kind of CPU slowdown utility but I don't know if they exist for 98 but it probably does.

Here are several things that you'll want to have on your PC if you go for a Windows 98 setup.

To start I'd recommend a Late model Pentium II or a mid range P3 as you'll want something with some power for later games as Windows 98 will support games generally through 2005-06.

Put two hard drives in your PC. Put a bigger one like a 20GB for most games and then put any hard drive in that's 1.97GB or less for any of the games that won't recognize a larger hard drive size. There are ways around that without the second hard drive with patches and such but the second hard drive option is just simpler to configure.

Make sure the PC you use has at least one ISA slot. Many of the games from the 80's will run just fine on Windows 98 but many of those games were developed before Sound Blaster cards became the standard and are not compatible with them and will have severe sound issues or no sound at all or even won't boot up right without a sound card that that game recognizes. This way you can always choose to buy one of those sound cards if you so choose.

There are always emulation like ways around all of the above mentioned stuff but if you're like me and a purist then that's the best way to go.