hi ken. you first option is fine.
you only need to check that your monitor is compatible.
you current moden will fit in the new machine and you can use your windows 98 (if kyou have the cd for it) so you dont need to purchase XP and a modem if you dont want to.
another thing to check is how your mouse and keyboard currently connect. if its a round plug (that I believe is called ps2 connection) then you are fine as the new motherboard will have sockets for them, if they are USB then they are also fine... but if you have the old style flat plug then you will need to get an adapter.
so check these out and if all fits then go for it
