Ok I am currently running a 40M machine under win98se installed with 98lite chubby mode and it works perfectly. The only two real issues are te video and hibernation and the latter is not a memory issue.
First off with the video I have found that you can use the Chips and Technologies Super VGA driver that is part of win98se to get up to 256 colors with the memory upgrade with no problems. Pete found that by using the SciTech Video Doctor driver you can get 16 bit color working but I am still working on that one as the driver builder blew up on me repeatedly. Right now I am happy with my 256 colors.
Second the issue with hibernation is not a memory issue at all. It is just a requirement that the first partition be a fat16 partition. This may be an issue for linus installs but if you created a fat16 partition of a little more than 40M you should be ok. If you are using win9x just be sure and make the first partition fat16.
I posted where I found my memory on the CF-01 Memory thread. I don't have the information handy here now but you can check that thred for details. Total with shipping and insurance was $46.99 for the 32M upgrade I listed in the above thread, I know since I just ordered another one for my Ricoh G-1200s. I don't have any idea if they would do a bulk discount, someone would have to contact them directly.