Just experienced the issue and version 3.44 indeed does work.
The newer version (3.47) did also work until I installed newer drivers (1.06/1.07) for a Voodoo3 3500 - when using older 3dfx drivers (1.04) there was no problem.
Found out while re-installing everything step by step ... ... ... - and afterwards I searched and found this thread... :headslap:
So, what is causing the system to lock up at boot is not absolutely clear to me at this point because the system is not really vanilla --> installed IE6 and WMP9 and official Win Me updates from a pack called "Windows Nation Update CD ME" before and various other software that don't seem to be critical but who knows until Daemon Tools revealed itself to be the villain. Also the combination of hardware and used drivers/versions might be the cause (CUBX-E mainboard / Voodoo3 3500 @ 1.07 driver / Vortex2 @ 2048 / 3Com 3C905B-TX @ 5.4=4.08 / Promise Ulta100 PDC20265 @ 2.00.0.29 drivers). At this point I'm glad to have it working thanks to the above comments and I'm too lazy to try out the diverse possibilities.
PS. I'm reading along at vogons for some time now - very nice site with very nice folks and absolutely valuable information here!