you can add as much RAM as you want to, but it still only allocates a small amount of RAM to resource memory for the desktop icons, GUI, etc. Not every program releases this memory as it should, so after running things for a bit, it can get low on system resource memory. Due to DOS legacy issues, this area of RAM is under the 640K mark, so you could add in Gigabytes of RAM and still have the same problems.
Best tips are to close out a program when you are done with it and reduce the clutter of icons on your desktop by placing them in folders and rebooting after the resource memory gets low. That is the only way I know of reclaiming low system resource memory. Also by reducing the number of programs that load up when Windows starts, will reduce the resource memory used. I suspect you have many programs starting up with Windows. Run MSCONFIG from the RUN Menu and see what options you get for Windows 98 to select the programs you want to start up with and deselect the ones you don't want starting up with Windows. Click on the "Startup" tab and see all the checkboxes there. Every checkbox is a program that Windows runs as it starts up. If you reduce these, Windows will also start up faster. But some you may need, like Antivirus background scanners, your scheduler, your event reminder, etc. So be careful of what you check off. Don't get rid of ScanRegistry, because it is helpful and can check your registry for errors. Don't get rid of Winmodem, if you have a Windows Modem. You can check off Yahoo Pager, and only run it as you need it. That will save some resource memory.
Microsoft was supposed to fix this "feature" in future versions of Windows, but to the best of my knowledge they have not done this yet. It still exists, but it isn't as bad in Windows 2000 or XP, as it is in Windows 98. In Windows 98 I have to reboot it every two days to reclaim resource memory, otherwise things get all wonky, blue screens, fatal exception 0E errors, etc.