Tom's Hardware Guide has done some testing to find out wich OS is the best for playing games :
The tests show that there's no reason today to use Windows 98/ME in a new system. In many of the benchmarks, XP and 2000 are ahead - albeit only by a small margin. The biggest advantage of 2000 and XP, however, is in the more modern architecture, which, thanks to the increased stability and safety from crashes, allows for a much more relaxed work environment - and, of course, increased demands on the hardware as well.
98/ME users might ask if it is worth spending the money on XP and the additional RAM required for 2000/XP. This depends, above all, on how you plan to use the system. If you're only going to play games on it, then you can continue to use ME or 98SE. Most of the manufacturers no longer offer driver support for 98, but support for ME should still continue for a long time. All ME drivers work on 98 without a hitch (the naughty ones say that ME is only the retail version of a service pack for 98 SE...).
Recommended: Click here to Update all your outdated drivers