Personally I would recommend Windows98 or XP. I just built a purely emulation machine using Mamewah and windows xp. It has a pentium 3 500mhz 128mb of ram. I used Nlite to strip all the unnecesary stuff from xp. All the games run full speed. You just have to know which emus to use. Here they are in order of use.
Winkawaks = Neogeo, CPS1+2
Raine = Arcade
Mame = FastMame 71
Fceultra = Nes
Kega = Genesis, Master System, Game gear
Visualboy Advace = Gb, gbc ,gba
It's controlled using only 2 playstation joysticks hooked up via usb adapter.
The only reason I didn't use windows 98 was because I couldn't get joytokey working. Or was it joy2mouse? You get something like a 10% increase in performance with 98 instead of xp. Also if the game is supported by Winkawaks, Raine or Mame. Winkawaks has better performance then Raine and Raine has better performance than mame.