Win98 SE Parallels 3 devices, original MacBook Pro
I've found that performance dropped in my Win98 VM running in Parallels 5 (vs Parallels 4), so I split off 8GB into a new partition and installed Tiger (allows me to run some software that Snow Leopard doesn't support). This gave me a second OS X boot partition, where I could install and update Parallels 3, without interfering with Parallels 5 on the same machine. Now I have a better-performing Win98SE VM than Parallels 5, Fusion, or VirtualBox can offer in OS X.
Here's the hardware in Device Mgr, as Parallels 3 presents it (on an original MacBook Pro), after Parallels Tools installation (all drivers are Microsoft 4-23-99, except where noted parenthetically):
• CD-ROM: Matshita DVD-R UJ-857
• DIsk Drives: generic IDE disk type47, generic NEC floppy disk
• Display adapters: Parallels Video Adapter (Parallels 10-17-2008)
• Floppy Disk controllers: Standard Floppy Disk Controller
• Hard disk controllers: primary IDE controller (single fifo), Standard Dual PCI IDE Controller
•*Keyboard: Standard 101/102-key or MS Natural Keyboard
• Monitors: Default Monitor
• Mouse: Standard PS/2 Port Mouse
• Network Adapters: Dial-Up Adapter, Realtek RT8029(AS) PCI Ethernet NIC
• Other devices (not working): PCI bridge, PCI Universal Serial Bus
•*Ports: Printer Port (LPT1)
•*Sound, video and game controllers: Avance AC'97 Audio for Intel Audio Controller (Avance Logic 10-17-2008), Avance SB Emulation (Avance Logic 10-17-2008), Gameport Joystick, Sound Blaster 16 or AWE-32 or compatible (not working)
•*System devices: Advances Power Mgt support (not working), Direct memory access controller, IO read data port for ISA Plug and Play enumerator, Numeric data processor, PCI bus, PCI standard host CPU bridge, PCI standard ISA bridge, Processor support, Programmable interrupt controller, System board, System CMOS/real time clock, System speaker, System timer
•*Universal Serial Bus controllers: Standard Universal PCI to USB Host Controller, USB Root Hub
Using the trackpad, I haven't seen trouble with the mouse in Parallels 3, nor do I remember it in Parallels 4. In both Parallels 4 and 5, whenever I opened a DOS prompt in Win98, performance would drag until a short time after I closed it. I don't see that in Parallels 3. In both Parallels 3 and 4, Win98 started crashing on shutdown only after I manually installed the Parallels 3 video driver. In the VM where Parallels 3 Tools installed the video driver, I've never seen that crash.