I think IE 3 was the first bundled version
Remember, Microsoft originally distributed IE in their Plus! pack, and only made it available free later. OSR2 (late 1996) was the first release that actually included it, and that was of course the still-cruddy version 3. At any rate, there was a period of time when most users would still be downloading something.
According to [link|http://www.cgonline.com/features/010625-f1-f1.html|this history], Windows 98 was the first IE4 bundle - between the time IE4 was released (October 1997) and the bundled version, you'd have still had to download it.
Netscape 4 first came out in July 1997. And guess what? The period of time where Netscape really crumbled was in late 1997 to mid-1998. (That's when IE really started eating Netscape's lunch, taking them from 60-70% market share to 40%.) Microsoft's deal with AOL probably had a lot to do with it, but I really think Netscape quality and other bad moves - maybe even sheer overconfidence - had some part of that. With Netscape quality poor and lagging on the Java front, a lot of people (including myself) who thought IE3 sucked took the opportunity to give IE4 a whirl.
Netscape executives didn't help by [link|http://news.cnet.com/news/0,10000,0-1005-200-333656,00.html|statements] like "It's not the browser wars anymore, it's the portal wars," said Dave Rothschild, vice president of client products at Netscape. "We are getting huge growth in Netcenter users, and that's what counts--driving people to your portal."
Of course, the portal frenzy has faded. You've got Yahoo, and maybe a couple others that are grimly trying to make a go of it. And we know where Netscape went.
"Beware of bugs in the above code; I have only proved it correct, not tried it."
-- Donald Knuth