My take on OSs
Let me preface my remarks by saying that in my day job I work in the IT department of a Telecom company. My current job is Helpdesk / PC tech, and I have been working with most OSs (except Macintosh) for a few years now and have formed my own opinions. However comparing OSs is a little like comparing automobile brands - if you have had a bad experiance with one you are likely to remember it for a long, long time.
Hard2hear is basicly right on in his asesment. Windows 2000 is really NT5, and Windows ME could easily be called Windows 98 Third Edition. They continue the general trends and characteristics of their predicessors. Win2000 is intended for a professional enviornment. It is designed to be far more crash proof - if one process dies it does not take down the whole OS with it. It also has nice network management features. It is more of a resource pig but this really isn't an issue anymore with RAM and drive space being so cheap. Win2000 also adds support for the FAT32 file system, something sorely missing from NT4 (this makes dual-booting much less of a hassle). However on the negative side it has no support for DOS (no big loss), much less hardware driver support, and does not poperly run some consumer apps (you can forget about playing 90% of all games out there for example). I don't know if it has any functional plug-n-play, something that was missing from NT4.
Windows ME seems (I have just installed it on one of my 4 systems at home) to be Win98 with an interface makeover plus more drivers. It has a better version of the Internet sharing feature that was built in to Win98SE. I have not had a single crash with it yet, but it is still too new to judge whether it will be better or worse than Win98. I am a bit surprised to read drstawl's commment, because I have found Windows 98SE to be by FAR the best and easiet OS to add or remove hardware - the plug and play actually works as advertised and driver support is massive. Windows NT4 on the other hard was one of the worst, with very poor and cryptic tools for setting up and troubleshooting hardware. Not something for the novice user.
In my own case, my DAW is a Pentium IIIEB 533 system with 256 megs RAM runnning Windows 98SE. I am using Cakewalk 9 with a Gadget Labs 824 card. I also use the system for other things (including the occasional game - guilty!) To date I can't recall ever having it crash, however I make it a habbit of keeping the system fairly "clean" software wise and do regular maintnence. I also use Norton Ghost to back the system up at regular intervals in case something does go wrong.
What you use is up to you, the only thing I will add is that a frequent cause of the grief I hear about Windows 95/98 is too many programs and processes running in the background. Be careful about applications you install, too many of them want to load themselves automaticly on bootup and after a while you have a boatload of crap running and are left wondering why your system is so slow. If you follow that simple rule Windows 98 can and should work just fine, but if Windows 2000 sounds like what you want, then go for it! And good luck to you whatever your choice.