Let me see if I can give my own take on this...
First, I assume you're going to be installing Windows 95 on the system, which includes DOS 7 as a consequence. I have done the same on one of my older machines as well, so it's fairly fresh in my mind.
Second, let's address your CPU. You said your MB came with a Pentium 120 in it. That means the CPU voltage is between 3.4v and 3.6v. With this voltage, you can go up to a Pentium 200 (P54c), but you will NOT be able to go to the MMX line (200/233, the P55c chips) without adjusting the CPU voltage on the MB. If there are jumpers for this, awesome. If not, I know MY motherboard has a Voltage Regulator Module socket designed for a plug-in module to do this for me, but I do not have one of those, so I was limited to a Pentium 200...which works GREAT for DOS and early Win9x games. You would also need to adjust your Front-Side Bus (FSB) speed, as the Pentium 120 runs on 60MHz bus and the Pentium 200/233 and all of those run on a 66MHz bus, slightly faster. I'm sure there's a jumper somewhere on your MB for this, at least. Also, your CPU Multiplier will go from 2x (on the Pentium 120) to 3x (for the Pentium 200).
60 MHz FSB x 2 = 120 MHz CPU
66 MHz FSB x 3 = 200 MHz CPU
Third, your memory. 32MB is very good for DOS and early Win9x and hits a sweet spot for compatibility. But my MB had 40MB on it (2x16MB + 2x4MB). So, me being me, I maxed the MB out with 64MB (4x16MB). Windows is perfectly happy with this, but for DOS, I set up emm386 for 32MB Extended Memory and 32MB Expanded Memory when running in pure DOS. This not only prevents those DOS games from failing to start like someone mentioned earlier, but it ALSO means I don't have to reconfigure it every time I want to play one of the rare games that expects Expanded memory instead of Extended. This way, I don't have to use one of those multi-boot selectors like Phil's computer lab uses on his DOS machines. I also always natively install Mouse, Sound, and CD-ROM drives, as it's not like they take up a lot of my 32MB space. The important part was freeing up as much Convention Memory as possible, and I got it to 632KB out of 640KB free, loading all of my drivers and most of DOS into high memory with only the minimum amount of Conventional Memory taken up to get all that working.
Fourth, let's talk about video. Surely, you're more concerned about DOS compatibility than Windows. For this, I'm going to direct you to watch a bunch of "Phil's Computer Lab" on YouTube. He's done A LOT of work comparing different graphics cards from this era and is very knowledgeable on the topic. For myself, a helpful forum member sent me an ATI Rage IIc 2MB PCI card and it works great. I paired it with a Diamond Monster 3D Voodoo 4MB PCI card (yes, it was rather expensive around $55 USD) and a good 1-foot VGA pass-through cable that I got on Amazon. The ATI card has good compatibility with DOS games - I haven't had a single one complain yet or have any kind of graphics issues and the performance is pretty good.
Why did I choose a Voodoo? Well, back in this time period Glide was king. And to use Glide, you really needed a Voodoo card.
Why did I choose a Voodoo (1) over a Voodoo2? Because a Pentium 1 at these speeds couldn't possibly feed enough data into a Voodoo2 card to show any kind of performance gain over the Voodoo 1, AND I had to deal with the fact that Tomb Raider 1 refused to work on my Voodoo2 card, no matter what I did, but it immediately worked perfectly on the Voodoo 1 card when I got it. So for DOS game compatibility, the original Voodoo1 card can't be beat.
On my own personal IBM Aptiva computer, which runs on a 300MHz AMD K6-2 chip, the MB has a Rage II+DVD chip on it as well as 2MB of video memory, so I didn't need to bother with a discrete graphics card - I just slapped a Voodoo2 card in there and Windows 98 and was done.
So it really depends. Does your MB have a built-in graphics chip? You'd know if it did because then you'd have a 15-pin D-Sub VGA port on the MB. I'd try that out with DOS games to see how it behaves before I spent any money on a discrete 2D card. But it's up to you.
Fifth, it's hard to find good/working HDD from this time period. My Win95 system's MB has an 8GB HDD storage limit and I only had a 20.4GB drive, so I used the Maxtor Drive Overlay software to be able to use it. Basically, since the BIOS can't read or use anything over 8GB, when it first boots and sees the HDD (which it think's is only 8GB in size), it tries to boot the boot sector of the HDD, which lies this overlay software. The software runs resident in the system memory and allows you to use the full 20.4GB of storage space on the drive. It also points to the new boot sector after it loads, so Windows 95 boots properly, DOS works properly, etc. It only adds about 10 seconds to my boot-up times, but as I didn't have to deal with multiple-partitions, I found this to be an acceptable annoyance.
Also, I'm going to point you once again to Phil's Computer Lab, as he's done A LOT of testing of SD-adapters, Compact Flash adapters, SATA-to-IDE adapters, etc. It looks like Compact Flash would be your best bet for compatibility with DOS, but you have to deal with availability of parts in your area.
I use a brand-new low-wattage power supply for all of my retro builds except when dealing with Pentium 4 and AMD Athlon XP processors, as I need a strong 5v rail for those. None of these early retro systems are going to pull enough power to even begin worrying about amp loads on 5v or 12v rails.
