(Subtly wonders if he should do a 'diskless win9x machine' writeup or not. Decides to do so.)
It's possible to use a network deployed dos floppy image and a minimal networking stack (like mtcp) to fully netboot a win9x instance.
The boot process more or less goes:
RPL / PXE pulls a 1.44mb floppy image from the fileserver, which is a boot disk for that version of win9x.
The system boots this image. The image contains himem.sys, emm386.exe, xmsdsk, smartdrv.bin, scandisk, attrib, any dos drivers you need, then finally a packet driver for the nic and mtcp. It has a 'full install' version of msdos.sys.
(If you use pxe, then you can use the universal pxe packet driver, which is quite small.)
XMSDSK gets set up to host the OS, and to load at the top of ram with the /t switch. Must be loaded from autoexec.bat to stop windows complaining.
C needs to be ~512mb to 1gb in size.
MTCP is used to pull a smartdrv3 compressed volume file which gets written to the ramdisk. Attrib is used to set the file system and hidden.
Scandisk is called on the volume file with the undocumented /mount syntax.
[Scandisk C: /mount]
after that, you'll have a mounted compressed C drive with a full windows deploy inside, and you just need to start it by calling win.