Agreed, stay away from ME unless you like General Protection Faults.
In my latest project, my computer is a Celeron 400 w/256MB of RAM. I'm running XP Pro and MAME 32 (version .66) and it runs all the early stuff really well. Even Metal Slug plays okay (slows down some on heavy animations, but still generally playable).
So if you're main interest is in the classics, XP shouldn't be a problem. If however you want to squeeze every last cycle you can get out of your processor, go for 98SE and command line MAME.