Are there license issues around this project? I doubt Microsoft would care to put the resources into enforcement of windows 98 licenses but I am just curious about the legality.
Microsoft only goes against piracy of software they still support and upgrade.
They don't bother with the old software because it isn't worth it to sue or send a c&d letter because they don't earn an income with it anymore. So they don't lose income if someone pirates software they no longer sell.
In fact they gave away the source code to an early MS-DOS and MS-Word as part of their own open source license.
It is good PR for them if someone emulates their old software in the web browser and gives them free publicity.