I dont really think the router should need any particular operating system....maybe it is some software that comes WITH the router that needs w98 or newer.
I think possibly in your case I would just buy Windows Xp home edition and then just format the hard drive and do a full install of XP Home. The only catch is youd have to save whatever you have on the computer now because you will be formatting (wiping it out) during setup.
Do you know the specs on the computer...like the cpu speed and the amount of memory on it?
You probably want at LEAST 256m of memory to run xp...and something like at LEAST a 400 or 500mhz processor.
you can get windows xp home for something around 90$ here for example
http://www.saveateagle.com/micwinxphome1.html
I wouldnt bother with a lot of upgrades to the operating system...upgrades are sort of a hit or miss deal...its always better to do a fresh install.
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is the router already there? I would try to get it going first with w95.....we on this forum can help you with that if you want to try.
JP