RE: Best operating system
You didn't state how much RAM you have. Win XP is better at managing memory but it comes with a lot of overhead. If you're running with a marginal amount of RAM, you might want to stick with 98 anyway. Just remember to reboot before every flight. And on long flights, performance will begin to degrade after a while.
Core 2 Quad Q6600, 9800GTX+, 4GB, Win7 HP 64-bit, TH2GO, 8 GoFlight, CH [Eclipse Yoke, Throttle (Pro and Quad), Combat stick, Pro Pedals], Saitek [Yoke, pedals, X52], TrackIR 3