You should not disable Virtual Memory.
Under Win98(SE), I usually let Windows manage it and leave it as a dynamic swap file. I'm not too concerned about loss of performance. Make sure that you have the ConservativeSwapfileUsage=1 under the [386Enh] section of system.ini to maximise the use of physical RAM.
Under Win2K, Microsoft defaults to 1.5x system RAM as the initial size of the pagefile. As a minimum, Microsoft recommends the size to be system RAM + about 12MB. This size is to ensure that when there is an error, there is enough room in the pagefile for a full dump from RAM.
Personally, I don't care what the RAM dump says, since neither Microsoft or I can really make much use of it. I have 256MB of RAM....I simply set the pagefile to an initial size of 160MB and leave it with no maximum. I'm not a user of programs that use RAM heavily like Photoshop, so I don't need that much RAM anyway.