I was fiddling with 98 in QEMU today and I've got this screen:

It's easy if you want to achieve this in your real PC or virtual machine running W9x:
1. Uninstall your graphics card driver from the device manager.
2. Before rebooting, select No when the system will ask for it, and add a new hardware (without Windows's PnP or non-PnP HW searching), named "Standard VGA graphic card".
3. Reboot the system. Windows should be in beautiful 640x480 mode with amazing 16 colors.
4. Right-click on your desktop, click Settings and select 2 colors from the combobox.
5. Click OK and whoah, you've got yourself a functional, two-color GUI operating system!

I have never saw Windows in two colors. Even Windows 1.0 was in color


Regards,
inflater