Where I am today:
I have managed to get USB working, not using myne's method, but just taking the files I couldn't get to work as an installer with Internet Express and compressing them as an SFX archives in WinRAR 3 that installs the files using the installer inf file using the advanced installer, and that seems to work just fine, both on 86box and on real hardware. So I decided to add more software using the same approach, creating a batch script to execute installers, and bundling them together in an SFX archive. Then taking those, and bundling them into a single, big SFX installer, called slip.exe, containing a batch script to execute the individual SFX installers I have made for each part (or just the plain MP9 installer).
I figured I would try to take the same approach to integrating the updates from the 2004 update CD released by Microsoft. I used the INF files from the CD to determine the order that it installs updates in (and lifted the switches used for silent install), and decided to try integrating IE6 SP1 first, since that is what the CD installs first. That works mostly, though the install takes a good while, and I took a couple of stabs at trying to get the installer to run more quickly (I don't care about preserving my IE5 configuration, for example) but failed to get any significant time improvement.
Windows Media Player 9 installs really smoothly, with absolutely no issues that I can see.
After giving up on getting the IE6 setup wizard to skip steps, I decided to integrate the actual Windows updates. I didn't use myne's approach because I figured I would see how well just copying the approach Microsoft takes on the update CD works out. And because I need to install PowerShell in order to do use their method. That has worked reasonably well, however two updates, KB 329115 (319115USA8.EXE) and KB 814078 (js56men.exe) failed during Windows setup this way, but all the other updates look to have successfully installed.
KB 329115 failed with a message about not being compatible with my version of Internet Explorer, while KB 814078 failed with a message telling me "The disk labeled Windows Script Version 5.6 is now required. This disk is provided by your computer manufacturer, click ok to continue" asking me to find a file that is bundled in the update.
Both successfully install after I boot for the second time, and add my monitor through plug and play. I suspect KB 329115 is just unhappy that I haven't rebooted since I installed IE6. No clue about KB 814078. I might just try to run them on second boot (not entirely sure how to do that in the Windows 98 setup flow, but sure I can figure out). But more likely to try to try myne's PowerShell scripts first.
See slip.exe (which I uploaded to archive.org), which I invoke at the end of the setup process through msbatch.inf if you are curious. I like the idea of having everything I am adding in a single file, because I am already adding a ton of new files to the WIN98 folder with INFINST. But then I am watching WinRAR spend a fair bit of time extracting things at the end of the install, but the biggest time sink is the IE6 SP 1 install, both extracting it with WinRAR and then installing it.
What I want to do next:
Add DirectX 9.0 C into the slip.exe file, silently install it.
Try out myne's Powershell scripts to create batch scripts to install all the official updates. Maybe I get some speed advantage by doing that, and hopefully I avoid any issues by avoiding the actual installers for KB 329115 and KB 814078, and things will work out, because I already have everything they want installed, and the installers are just unhappy without a reboot.
Slipstream rloew's patched files into the source 98 install files using his slipstream utility, along with replacing doskey with the improved version I mentioned in the first post. I am not 100% sure some of his patches don't add files that don't exist in the 98 installer, if they do, I will add them with either INFINST, or as a step in slip.exe if needed.
Add 7zip 9.20 and silently install it. Maybe give it certain extensions by default, if that is possible with registry additions/modifications, I haven't looked into it.
Add non-Intel chipset drivers to my 98 CD using INFINST.
Add Microsoft IntelliMouse drivers of some sort (and maybe accompanying software?)
Remove login prompt request with a registry entry
(Maybe) Add notepad++
(Probably Not) Figure out some method to consolidate the drivers I added, and their corresponding custom.inf file into a single file to keep the number of files in the install folder down. Maybe add them to their own special cabinet file, and integrate that into setup? Seems like a huge pain.
(Probably not) fight with Internet Explorer 6 install to either be smaller, faster, or ideally both