Okay, after a lot of twiddling, I got a working microdrive image I'm happy with. I made a .img mostly for my own benefit as a backup, but I'm willing to offer it up to anyone who needs a microdrive image (340MB).
Some notes on this image...
Devices installed:
Video (800x600 16 bit)
Sound (playback and recording)
USB20 2.5" portable hard disk ( http://www.usbgear.com/usa/usb-20-note-drive.html )
USB keyboard and mouse
DLink USB 10/100 ethernet adapter
Software installed:
Win98SE
TweakUI
Some other random programs. NOTE: some of these programs are installed as "D:\Program Files\(etc)" to keep the microdrive free of space.
It autologins to me (with no password), easily changed. It will boot and work without the hard disk attached, though you'll get some errors. It also sets TEMP and TMP to d:\temp. All of these things are easily changeable.
The best part is you get a bootable image (for a 340MB microdrive).
If you're interested, give me some contact info and I'll point you at my webserver where I've got it up. I don't want to leave the info on here, as I don't know how long the image will be left on my server. I also want to regulate how much bandwidth gets eaten up.
File size: 353,687,040 bytes.
'twas a labor of love, but I'm happy to share my work.