I really dont know wat ur talking about on how to get steam working on this computer. you said Use a steam launcher, Steam buster should be a good choice because it don't need .net, that should allow you to play the games. I also want to be able to chat to steam friends. What you talking about STEAM LAUNCHER? STEAM BUSTER?
I will set up a win98 VMware, and give it a shot. I will report back with the results.
While I am at it, you might try to take just the steam.exe from another install, and put it in it's own directory and run it, it is set to self update, and you won't need the new windows installer that it claims to need for the msi.