No matter what OS you use, the single most important thing is that you are happy with it. I have 2 IA-1s. I use win98 on the one (naturally I can move it back and forth) and I use one of the beia images on the other.
With the beia image, I can simply use that ia-1 to dial up online and get some information quickly. I keep this one at one of the offices we sometimes use.
With windows 98 on it, I haven't had any problems. I cannot remember the IA-1 OR the microdrive ever locking up due to getting too hot. The microdrive I have is an IBM 340mb, so maybe that is why I have no problem using the drive on either of my IA-1s. I have not done ANY modifications to my IA-s other than resetting the bios.
Both of my IA-1s are refurbs. The 1st one I bought at staples for $30 including tax (after $100 MIR) worked well for 6 months, until I heard a little noise and the screen burned out. I think it was due to the fact that the wires had rubbed against some metal due to me taking it apart a bunch of times. So they sent me a refurb and it has worked well.
The 2nd one is also a refurb. Right before the end of 2001, when msn said they would no longer support the emachine msn companion, they said they would send you an IA-1 if you had one of the emachines. So I looked on ebay for an emachine msn companion, and got one for $25. Then called up msn (I did have an msn account) and told them, and they sent me a refurbed ia-1. Still have the emachine too.
As far as installation for the win98se, it wants just a few more megs for the minimal install than win98FE. Sounds like a problem, but really isn't, so, just make sure that you copy some of the .cab files over to the internal flash. Then when it gives an error, point it to the internal flash. I think that is how I got it working. I did have win98se on it for a while, but then was using the microdrive in an ipaq 3635 sleeve, so I had to reinstall windows, and just put win98fe on it.
If you want win98se on the microdrive, let me know via email, and I can probably help you out.
I would most likely be using the IA-1 more if I didn't already have 13 computers, appliances, and PDAs.