As you have already figured out you will need to bang SE over the top of 98 as 98 does not have ICS built in. If you would rather not install SE then click here and use the third party software available.
If you do decided to install over the top thats all you have to do ie: just run the disk and install over 98, it will keep your files and folders safe untouched.
You don't need a router and you do need a x over cable and two NIC's. This way you will have to have the 'master' machine switched on all the time for the other to be able to have internet access.
If you want a router then the master doesn't have to be online for the client to have internet access.
click here for information on how to install ICS. The 50% issue...you need to be aware that if machine one is on a site that requires lot of resources ie: graphics refresh times etc it will slow the other down...if however they are both just surfing the internet the loss will be minimal. 50% has been mentioned because you are obviously halving the bandwidth with the other machine.
click here if you run in to any problems with ICS.