This is true. But here's the details: WinME still has a DOS mode, but you have to reboot to get into it, which is something Win98 didn't have to do. But once in DOS mode, it's smooth as silk. When you take into account the fact that WinME can use more RAM and is in general more stable, the inconvinience of having to reboot into DOS is far over shadowed by the benefits and WinME becomes the clear choice for Win9X kernel based OSes.
I do not use Win95 or Win98 at all anymore for retro systems. It's always: install WinME, set some post install tweaks, install drivers, removal of IE and Bob's your uncle.
I wouldn't bother with an old HDD. These days I go with a CompctFlash to IDE adapter and a 16GB, 32GB or 64GB CompactFlash card.
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Together you're talking about $45 to $50 shipped at the most.
This will vary depending on location in the world, but you get the idea.
That will not run a Win9X OS at all. No driver support for multiCPU or PCIe. Look for an AGP based system for Win9X support. However, that does look like a solid buy for $25.
If I'm not mistaken, that was one of the golden Athlon A's that could OC without any additional voltage and a change to the FSB(100->133) and a multiplier drop(5.5 or 6). For $25 that's a score!