If you had to drop the FSB to 100 to stabilize it, it is not an OS problem, but likely one setting in yout CMOS is not correct, or the RAM is not good.
I use a dual boot 98SE/XP pro since I get a MUCH higher FPS in games under 98, and I have 512 MB DDR 266 (in one chip) and Athlon XP 1800 and 98 has no problem with it, though you have to download a patch from MS update so it will add some seconds when shutting down, so the cache from the HD can be saved, but this is a problem found in any machine faster than 800 MHz according to MS. If your RAM is 133MHz you should have no problem, but if your RAM is not, it won't run well.
By mistake I put 100MHz RAM the first time, and the CMOS automatically set to 100 FSB, and then I tried to put it to 133MHz and I found a lot of problems, so when I went to check the RAM is realized my mistake, and I swap witht the chip of 133MHz. It run much more stable + it was a lot faster (I was 500MHz behind with 100MHzFSB)
Now for DH. XP is better for almost any program that you want to use, but I would always keep a dual boot in order to use for the games, some games run much faster under 98k, since 9x kernel requires less resources, leaving them free for the game to use.
In my PC if I want to play Spiderman (first one) I do it in XP because in 98 it runs toooo fast, so in the scene when chasing Venon thru the building, it gives you back the control too late (try the game, and you will see what I tell you), but if I want to play Spiderman: The movie, I do it under 98, since it requires more power, so I get a much smoother resolution than in XP. And since 98 will be only for games, you can do a very minimal instalation, which can take only 300MB.
I also use 98 to record CDs, because XP gives me headache (it won't refresh the contents of a CD after recording)