Comment Use mixed Linux + Windows mode. (Score 1) 313
Currently I would not recommend installing an old 32bit Windows on new hardware. Reasons include (1) Complete lack of drivers for some hardware and (2) Hardware (eg ahci) that has to work in slow compatibility modes.
Assuming your application runs on it I would suggest a Windows 2000 in a VM, with the guest given about 2GB of private memory (or just under). This is because (1) Windows 2000 is still very light on modern (or nearly) hardware. (2) It's compatibility is very good with both the 9X versions and the later XP and W7 so most (non Microsoft) programs will run. (3) It as a reasonable dos box and good 16bit support. (4) using the "270" hack you are not going to have any problems with license keys or activation servers going offline.
For the VM host I would suggest a 64bit linux using KVM as the virtual environment. I would NOT recommend using a 32bit version of the Linux kernel because the caching will not be able to use all of memory (despite it being available to applications) and the VM guest will be limited to 2GB without any choices. This is not the simplest of virtual hosts to work with but it does have very good performance and very wide hardware support. In addition with the correct choice of distribution it will be a very light host in terms of disk and memory overheads.
OTOH, if you just want something simple use Window 7's XP mode. (or perhaps Win2k in a Virtual CP)