I'd use win 98 like others have said. I ran it on a p75 desktop with maybe 16 or 20MB ram and it was just fine for dos gaming, other than late dos texture mapped 3D stuff like Screamer and Carmageddon - but that would have been the case in dos as well, the p75 isn't up to doing those games well. On that machine I have a pci USB card and I use a 120GB thumb drive with many dos games on it that I can readily remove from the system and load in a modern PC if I want to make changes.
For the libretto, if running win98, you could use a pcmcia card compact flash adapter for a similar idea. Have giant GB cf cards that you can quickly and easily pull out and put games on. You could probably affordably get some kind of giant one relative to what the OS will support, 50 or 100GB and that would store a lot of isos from your library, and if you somehow needed even more space, have the collection in two or more giant CF cards. 😁. Keep in mind that dos games with streaming cdda audio either may not play that audio when using a CD emulator like daemon tools depending on the sound card and drivers, or may not be able to play it well while the game simultaneously runs, due to the weak p75 CPU for that purpose as this was the era when hardware cables routed CD audio directly from the hardware cdrom to the soundcard, giving the CPU fewer things it needed to content with simultaneously.