It works flawlessly for me in Win98SE. The thing about that though, is that I designed that 98 box to play DOS games, and old Glide games. It has a non-PnP SB16 with WaveBlaster card. This card is not necessarily an option for most people with modern systems. I used the U8w9x patch from http://members.iinet.net.au/~rsd/U8inWindows.html
This is all I needed. I am using the CD version, (I have both the original CD version, and the Ultima Collection disc, both work.) The floppy version is in fact the one that has to decompress files. I remember that from when I used to have it. (It took forever.)
I can use FM, General MIDI, and I have digital sound. This means that you don't have to worry about Win9x causing sound issues for you. It should be entirely up to how compatible your chip is. I don't remember if those CMI chips have SB compatible modes or not. You should at least get General MIDI music. But the game isn't the same without Sound FX.
The coolest thing to do is to build a cheap (or free in some cases,) PC to play old games on, and get a cheap 2 port KVM. Mine plays absolutely everything old and good. 😀 Here are specs that are guaranteed to work well. (At least they do for me.)
Motherboard: ASUS P3B-F (Nice,fast, and stable board with ISA slots.)
CPU: Intel P2-400 (Runs anything into the early-mid Glide era.)
RAM: 256MB PC100 (Overkill for anything old.)
HDD: 40GB Seagate Barracuda 4 (Enough space for all of my DOS games and old Win9x games.)
Video: 3DFX Voodoo 3 3000 (Fast 2D, works well in DOS, plays all my Glide games quickly.)
Sound: Non PnP Creative Labs SB16 ASP with Waveblaster upgrade. (Works with everything period. FM, PCM, and GM.)
Network: 3Com 3C905 (Works in DOS, and is perfect in 98 to transfer games from my main box.)
Controller: Old Interact 6 button gamepad.
I have an shortcut in Windows98 that drops to DOS mode with an old-style DOS Boot Menu. I have choices for XMS, EMS, NOEMS, with and without CD drivers. There isn't an old game I can't play within seconds on this config.
I know this isn't exactly the focus of this board, but since it costs almost nothing, I think it's a viable option for everyone in here who loves these old games.