My personal preference is for Netgear stuff, and would probably go for their wireless router (they have one with print server as well) , you can use the old PC as a 'fileserver' but would still need a second NIC and would still need a wireless connection either a Wireless Access Point or the wireless router, so go with the router.
Can't see any problems with W98 and HDD size, personally I would partition it anyway.
I've got 2 Dell Laptops, a SmartPC250N, and a Inspiron 8500 Widescreen (superb), go to Dell's support forums to get a feel for any probs with them here...
http://forums.us.dell.com/supportfor...ry.id=inspiron Don't forget you can go through here...
http://www.couponmountain.co.uk/ you'll get some discount, £50 at the mo but can be up to £100, they're Dell affiliates, so you just need to connect to the Dell site through them and the discount is taken off automatically.
As for wireless, you can get the wireless 'built in' to the Dell Laptops, they use mini pci cards inside and the antena is built in round the screen, I decided not to do that and went for a Netgear 'g' PCMCIA card, obviously sticks out the side but more flexible in long run IMO.