Pete,
Microsoft has acknowledged that there is a problem with more than 512MB of RAM and Windows 98 / Me.
The problem is in the core Windows code.
See these Microsoft Knowledge Base Articles for more information:
http://tinyurl.com/slr2
http://tinyurl.com/3elp
The statement of the bug being configuration dependant springs from the fact that some systems function fine with 1GB of RAM.
There are many variables that effect whether a system will suffer from the bug.
The main issue, is how the BIOS, memory controller and devices deal with each other as a system.
I have personally seen systems slow to a crawl after increasing RAM from 256MB to 512MB. Removing the extra RAM fixes the problem.
There are 2 ways to limit a system to 384MB of RAM:
Install no more than 384MB.
Set a maxmem statement in the system files so that Windows ignores RAM beyond that amount.
Theoretically, you could install 512MB and set a maxmem to 500MB to maximize memory yet avoid the bug.
There are also benchmark test results that show "optimum" performance with 196MB of RAM on a W98 system. In the test, the same system with more than 196MB of RAM actually had lower performance scores.
Windows 2000 and XP do not suffer from the large RAM bug.
Of course, since Microsoft could not test the code with larger amounts of RAM than the best systems available at the time of development, there may be a large memory bug in the W2K / XP code, we just don't have the systems that would show it yet.
Chas