Win98 is still a useful O/S for machines under 128Mb, plenty of sites about have the ISO files for the 'boot diskette'. The original Win98 bootable CD's are also common enough now that it is no longer supported and because it has largely been replaced by WinXp you can often get a valid serial key to go with it for free as a bonus without having to resort to the well documented 'crack'.
What I will say against using Win98 these days is that sometimes device drivers can be hard to find, graphics and chipset along with USB in particular being required to make the most of the system. It was the one big gripe with Win98 that you had to install the USB support yourself as an optional extra.
Alternatives.. aside from XPlite are Linux variants DSL (Dam Small Linux) and Puppy Linux both of these will run more than happily down in 32Mb of ram. Puppy in particular looks and feels a lot like windows and even a modest machine can run the likes of Firefox, OpenOffice and Gimp (graphics software as good as Photoshop but free). Have had good results with it on older machines.
It should be noted that WinXp will run in as little as 32Mb thanks to 'virtual ram' where data is shuffled on and off the hard drive when the normal ram is full but it does make for a slower end result. Jules did run her aging Compaq laptop with it for a while but then 'downgraded' to XPlite, stripping out all the unused junk trims it down to a much leaner O/S weighing in at under 300Mb on the HDD.