Also mentioned in this thread: http://forum.arcadecontrols.com/index.php?topic=44634.0
wow, someone actually read that post! I have contributed!

I wonder if there are any drive size limitations.
so you know:
I got a brand new Seagate 120 GB PATA drive, formatted the whole thing NTFS under win2k using Seagate's DiscWizard utility because I was adding this as additional storage. I did this because I read on newegg somewhere that this utility was fast for formatting. I basically wanted a separate physical drive for my roms. Anyway, after downloading the free utility that I posted about, it was a breeze. Just booted to win2k, copied the necessary NTFS files (that they tell you about) to your win98 fat32 partition somewhere, then boot to win98 and follow the instructions. I think somewhere in there you probably have to reboot at least once, but it worked great!
I ran mame from my win98's C:\mame\mame.exe but used a rompath that included my ntfs drive - no problem. Mame Analog+ for dual trackballs in win98 worked this way too!
of course, ymmv! I would be a bit sketched out by doing it on a primary bootable drive (although this comment is not based on experience in any way). So, specifically to answer your questions about drive size, I'm not sure... I haven't used more than 60 GB of the actual 120 GB drive (to reiterate: 1 big partition).
Good luck!
Rock