Well, in order to use GPO, ALL workstations need to be Windows 2000 machines. Windows 9x/ME do not support GPO's. Even if you do install the ADCLient software on them.
What you will need to do is assign a System Policy. Windows 98 has some ADM templates that you can redirect the My Documents folder to a server share. But, you cannot "disable" them from saving to the local HD. In order to do this, you will have to train your users on where and when to save the files.
I know that this doesn't sound like a good idea, but it is the only way with Windows 9x/ME. NT/2000, you can set a GPO at either the Domain, Site, or OU level. Remember, if you set multiple GPO's at all of these levels, they will be processed in this order:
1. Site
2. Domain
3. Parent OU
4. Child OU
The GPO's will be over-written with sucessive GPO setting. Meaning, if at the Domain level, you have specified IPSEC policies for a certain setting, and then at a Child OU where the user account resides a different setting, the Child OU will apply. Use GPRESULT to test your GPO's in your deployment.
Let me know if you have any further questions.