Actually Windows 98SE isn't such a bad idea, but in all honesty for that size of processor another choice would be Puppy Arcade 10. That can be booted from USB and can run in RAM. The only let down is the SDL Mame inside. OK for classics, I suppose.
Also another suggestion is to go to plop.at
Great for USB booting for machines that natively boot USB and provision to boot USB/ISO/VHD from DOS.