Win98SE will work fine.
I upgraded a client's old POS Hewlett-Bastard (they're a pretty good company, I just like how that sounds!) Pentium/75 (16-->48MB RAM). I removed the moldy HP Win95 installation and fresh-installed 98SE. After the obvious fine-tuning (fixed-size swapfile, HD DMA enable, no bells/whistles like web desktop), the performance was an order of magnitude better than before. She could actually play Flight Sim 98 on that machine! Naturally, the improvement originates from the fresh installation and not Win98SE. However, Win98SE worked quite fine on the P75, if you disable unnecessary crap there shouldn't be slowdowns.
So it'll work fine, and the built-in IE5 will save you headaches. (don't use 98 first edition, it's a POS full of bugs)