as others have said above,
if you're computer lags with windows 98, then to pep it up a little it'd probably be best to format the disk and re-install windows 98 clean.
Honestly, the best thing you could do with the ME disk is put it back on Ebay!
The trouble I see is that ME is a bit more resource intensive and bloated than windows 98 is.
if you go the upgrade route you're not likely to see any performance issues, basically because the upgrade will try to preserve all your existing programs and data, including redundant data.
a fresh install of windows 98 will clear out a lot of things like reminance of programs you've once had installed that you removed, but were not removed entirely. old bits of spyware that may have found it's way onto your system and stuff like that.
of course, by re-installing windows you'll definitely have to get the AOL install CD out to put it back, but in the long run, I think that you'll find it's a worthwhile use of a day to format and re-install.
I don't know how your computer is setup, but I'd suggest that when you re-install you consider partitioning the disk into two drives, this (in windows 98) is done using a program called fdisk, which you use before you start the setup program.
in this way if you need to re-install in the future or something you can leave all your data on the other partition (usually D) of your computer. and format the C drive without having to wory about loosing anything that you've left there.
of course, you may still wish to go the ME route, and since you've used it in the past without problems I don't see as there is any real issue with this. (other than that you won't see as bigger performance increase as you would if you clean installed W98).
again if you go this route then I'd really recommend that you use the clean format/install option rather than just adding to what you already have...
also I think, that the bad things you've heard about windows 98 will be about windows 98, windows 98 and windows 98SE are different, there are a lot of bugs and instabilities that are in windows 98 that are fixed with the second edition release.
As an addition (though you've already said it's not relevant to yourself though it might make for interesting reading).
windows 98 is a DOS based operating system, windows ME is also a DOS based operating system, these are descendants of previous versions of windows like windows 95, windows 3.1 windows 3 and before, even to the point where there was no windows, just a black screen you typed commands on, (though the screen was probably green)
windows 2000 is an NT based operating system, it's an improvement of windows NT4.
sometime in the late 90's Microsoft realised that windows based on DOS just wasn't working, there were too many things wrong, it was big, buggy and exploitable, there were problems with memory management and handling that simply couldn't be addressed.
MS then developed a new technology it called NT
windows NT was built for businesses, mainly business servers and business desktops, the idea was that the OS was a lot more stable, and could do more things. however NT is distinctly different from DOS, which causes a few problems. (I'll elaborate later).
MS eventually decided that it was silly to release concurrent OS's there was simply no need for a DOS OS and an NT OS.
windows NT4 was not really ready for the home users because of it's limitations.
and as a last money maker, MS released windows ME, the last of the DOS's
ME pretty much crashed an burned, but essentially Microsoft didn't care, because they'd just made windows 2000.
windows 2000 was a version of NT that was cleverly named,
it was cleverly named because after windows 95 and windows 98, people wanted a windows [some date] release.
people hadn't wanted windows NT4 because that was for business,
but windows 2000, well that had a date suffix and the idea was it was immediatly trusted, that worked well... then NT made a strong footing in the market and DOS could finally stop being developed.
NT was more stable because it runs protected memory mode, there is no direct access to the hardware, (all hardware access has to be cleared through level 0 DLL files) this unfortunately broke a lot of older hardware, like joysticks and MIDI controller cards.
windows NT does use more money, really if you have an old machine it's not recommended. (personally I have an old laptop, windows 98 works fine on it, but really you can forget about windows 2000, it installs, but then it runs like a three legged dog).
windows NT and windows XP are not nearly the same and you can't expect all the trimmings that you expect of windows XP in the previous release,
for a start the DOS emulation dos not work as well. so (for example) you won't be able to play older DOS based games.
windows XP is likely far too bloated and resource hungry for your hardware.
ultimately, if you want ME, then install ME.
upgrading should keep all your settings, including the internet explorer settings.
personally, as I said, whatever path you take, I'd recommend formatting the computer first.
it's a little more work, but it is worth it.
