I have two machines that I use... I'll make it short without going into a tangent, but it should explain what the systems are good for:
1 - Dell 386 DX-25 w/ 8mb of ram, 512mb SSD IDE "Disk on Module", w/ Roland MT-32 w/ Sound Blaster 16, 4x CD-ROM Drive, and a 5.25"/3.5" Disk combo. It has a Cyrix DLC-40 chip that essentially allows it to run at a 486 SX-40 speed. When you enable the cache (through a TSR), it runs at the full 486 SX-40 speed, when the cache is NOT enabled, it literally runs at say a 386 DX-25 speed. I have Windows 3.1, and DOS 5.0 running. I used Memmaker to maximize the lower 640k base memory. I also have an ATI VGA-Wonder with 1mb of video memory (which was hard-core back then). On this machine, I play games from the late 80s through the mid 90s. Most Sierra games like Kings Quest, Space Quest, and Quest for Glory all play super on this machine. I can also play all the games from the early-90s... especially the ones that were based on the CPU timing. Also, games like Starflight, Sentinel Worlds, and many of the TSR AD&D games play really well on this system. Note, everything is configured using jumpers and dip switches, no plug & play. Wing Commander 1/2 and all of the Ultima Games up through 7 part 2 would play well on this machine.
2 - Acer Altos 1000, Dual Pentium II 333Mhz, a 4 gig SSD IDE drive for the operating system, and a separate 40 gig IDE drive for the D drive for games, Roland SCC-1 General Midi w/ Sound Blaster 16 ASP, 24x CD-ROM CD-R/W drive, and a 5.25" drive, and a 3.5" drive. I have Windows 98 SE configured to boot in DOS (BootGUI=0 is set in MSDOS.SYS). I have a 3D graphics accelerator card with 32mb of on-board memory, forget the brand. The computer itself has 256mbs of ram, which was decent back then, but totally overkill for what you would normally use. For this machine, I play the majority of my games... that includes everything from the early 90s all the way to the early 2000s. So for example, the original System Shock would play well on here. For all of the games that were designed to be properly "speed-adjusted" based on the performance, this system is great. There's no lag in loading, but the games run perfectly smooth. The majority of the games I actually plan on here are pure DOS games... Alien Legacy, Ultimate Doom, Doom 2, Wolfenstein 3D, all the AD&D games from that time, you name it. For the record, everything on this system is configured with dip switches and jumpers... this was during the time when "Plug-n-Play" was in its infancy, and there were a lot of issues. So it was important to me that my soundcards and everything else were properly configured. I also have the USB ports disabled in the BIOS. USB was fairly new during this time, so it wasn't overly useful.
Both machines have PS2 ports for the mouse and keyboard, and I use an HP KVM switch that accepts VGA and DVI, as well as PS2 connectors, sound, and USB. I have EVERYTHING plugged into this. I also have my DELL 990 i7 computer which is my normal machine (the one I'm on now). I actually have it hooked up to the monitor using the HDMI port, and same with the sound since I use the 5.1 channel surround. But the other two computers are hooked to the monitor using the standard VGA port (so I simply change the input switch on the front). For the sound, I simply change to AUX on the amp to use either the sound from the 386 or the Pentium II. The keyboard and mouse both go through the KVM, and everything works perfectly.
You definitely don't want your machine to go TOO fast, but everything else can be replaced with modern technology... IE: laser mouse, the fastest ram, the best graphics card, the best sound card, all that you can that will fit your ports and slots. SSD is especially awesome since they sell DOM's for everything you can imagine now.