Finally - after 3 evenings of trying to figure out where to get bootable floppy images, etc. -- Installed Win 98. But it only has 16 colors, very small screen resolution (480 x 650, I think), can't connect to wireless (maybe that's a given), and has no sound. Would anyone have any advice?
Install parallels tools from the main parallels menu. If you do not see an installer start up on your Win98 VM, wait 20 seconds and check your cdrom drive (in the VM). You should see it mounted. Run the setup you find there. This installs Parallels Tools (which includes the proper video drivers). I've done this for Windows 95, should be nearly the same for '98. Cheers.