I would say Ubuntu, but you already tried it... Puppy might work. http://www.zegeniestudios.net/ldc/index.php
<that's a helpful site to chose distros. Too bad it's down right now. I decided to post the link in case it comes back up anytime soon. http://www.linux.org/
<try that and search through a million different distros...
I have tried PCLinuxOS and Freespire and I can tell you that they don't work on anything less than 700MHz, 256MB.
Win 98 supports jump drives, but you have to install the driver that probably didn't come with the jump drive...lol. d/l it from the net if there is one. My jump drive works on Win 98 once the driver is installed.