I recently testedt Windows 1.x with a floppy I had around and it is working very well but it really require the following thing
VER SET 3 30
You write this command just before opening windows with WIN
What I really enjoy is that Window 1 is able to see any folder mounted on dosbox!. Althought every modern application will of course not work with WIN 1, game and some special applications specially made for it will be able to be run from there!
Also, WIN 1 run directly from the floppy, as far as I know, its possible to install it, but I prefer the mounted folder approach and save anything I did on it there
http://www.youtube.com/watch?v=wkCUDPctTpE Here a video of Windows 1 Game in action, 3D TicTacToe
http://www.youtube.com/user/SuperDave341?feature=mhee
My Youtube Channel for PC/DOS Gameplays, Mortal Kombat and Glitch Related Video