I managed to get my system to work with 1536 MB.

I am loading XMSDSK from config.sys, using INSTALL=E:\UTIL\XMSDSK.EXE 292992 N: /c1 /t /y
So, here are my initial results (using MaxFileCache=65535):
No Max
PhysPage or Max
PhysPage >= 48D00 -> "Insufficient Memory to Initialize Windows"
Max
PhysPage = 48C00 (1164 MB) works, but Win 98SE sees only 1162 MB. It is the absolute maximum that works.
Max
PhysPage = 48B00 (1163 MB) works, but Win 98SE sees only 1161 MB.
These two configurations above sometimes start OK, sometimes throw "Insufficient Memory to Initialize Windows".
Max
PhysPage = 48A00 (1162 MB) works, but Win 98SE sees only 1160 MB;
Max
PhysPage = 48900 (1161 MB) works, but Win 98SE sees only 1159 MB;
Max
PhysPage = 48899 (1161 MB) works, but Win 98SE sees only 1159 MB;
Max
PhysPage = 48800 (1160 MB) works, but Win 98SE sees only 1158 MB.
I stopped here and am testing the stability of this configuration. * If I set MaxFileCache=131072, it starts, but I get "There is not enough memory available to run this program" at some point, even with cpu-z.
And if I set MaxFileCache=262144, I just get "Insufficient Memory to Initialize Windows" and the system simply doesn't start at all.
Added 18th October 2007 - 06:40 PM:
* My stability tests on the 1158 MB show that it is stable, at least for 8h. So I reduced some more the value of Max
PhysPage, in order to find the highest value that windows accepted without displaying that strange behaviour of detecting the requested value
minus 2 MB (which is a bug I never had read about before!).
Max
PhysPage = 48600 (1158 MB) works, but Win 98SE sees only 1156 MB;
The above is the smallest value with which windows still detects the requested value
minus 2 MB.
So, the setting below is the maximum that behaves as expected. I'm using it now (1157 MB).
Max
PhysPage = 48500 (1157 MB) works, and Win 98SE sees all 1157 MB;
Max
PhysPage = 48400 (1156 MB) works, and Win 98SE sees all 1156 MB.
More later. HTH.
Added 22nd October 2007 - 05:33 AM:
Sorry, sorry, everybody!

I made a mess of this post when I wrote it and it eluded me up to now! I fell victim of the "paste bug" and pasted MaxFileCache where I should have written Max
PhysPage, meaning to modify it, and just forgot to do it.

Now it is as it should be. Sorry!
BTW, I'm presently using Max
PhysPage = 48600 and MaxFileCache=98304, without any problems, for the last two days. I'll try again to raise MaxFileCache (yes, MaxFileCache!) a little more tomorrow...