I recently bought Star Trek: Borg, but under Windows XP, the graphics were grainy and distorted. I looked into Virtual PC, and was finally able to run it with decent graphics! (Well, decent enough - obviously it was never going to be DVD quality.)
There's Microsoft's (free!) Virtual PC software. It simulates a PC inside Windows XP. You can install Windows 95, 98, ME, etc. - as long as you've got an installation CD - and then run Windows 95-based games natively with few problems.
Nightcrawler, your problem with this is that your hard drive is NTFS - this isn't an issue. The Virtual PC software asks you what OS you're going to install and sets everything up, so for a Windows 95 installation, it'll generate a virtual FAT32 hard drive. And if you have problems, you can use FDISK and FORMAT commands from a bootdisk to set up the hard drive as you'd like it.