We have not upgraded to XP and may not anytime soon. It's still available from Provantage. Many business users won't upgrade to a new OS until Service Pack 1 is released. I'm still running 98SE at home because my system isn't compatible with XP for some unexplained reason. Since it still works, there's little rush to upgrade.

Win 98SE and ME are built on a hybrid 16/32 bit architecture. Microsoft did this back in the Win 95 days to help the system with backwards compatibility with DOS and Win 3.x applications. Win 98SE and ME simply don't do a good job of isolating processes, so it's still too easy to crash them. Win 2000 and XP are fully 32 bit and are much more robust.

As for the new software, there may be parts of the application that use system services or API calls that aren't available on Win 98SE or ME. Face it, 98 is 4 years old, flaky, and limited. At some point, software developers have to make decisions about how far back they'll go with backwards compatibility. Virtually no one is still producing software for DOS or Win 3.1. I suspect that very little new software will run on Win 95, either. At some point, either as a marketing decision or for technical reasons, developers have to raise the bar for minimum system requirements.