I did a lot of research on this topic and concluded with this setup, this works awesome.
MB: Asrock P4i65g
CPU: P4 2.8Ghz Prescott 800Mhz FSB (disabled HT)
Mem: 2x256MB DDR400 (dual channel that way)
HD: 250GB SATA drive (board has IDE compatablity mode, boot partition is 30GB FAT32)
Video: AGP: 7800GS (have to use the omega drivers) or 6800/6600 (nvidia drivers)
Sound: onboard chip
IDEx2 and SATA I x2. SATA as a hard drive works, not sure about CD-ROM.
All devices on this motherboard work and windows loads just fine, make sure you partition the disk some other way than the tools that are included with windows 98. I just used windows xp and a 30GB partition allows FAT32. Extra partitions came after 98 was installed.
Sometimes i think the system is too fast for 98SE, but all devices work. Get DirectX installed and IE6 for updates, after that use opera as your browser, you can use a very recent release of opera with 98SE. There are drivers for USB thumb drives out there too.