Of course the Linux that was in the mid-to-late 90s is dead, but it's not difficult to rebuild kernels, or have weird configurations at all.
I've got a Linux box running on a set of eclectic hardware working as an arcade machine. The monitor needs very special and specific modelines to run, hates KMS, and has some hardware that does not work right under the standard HID input driver. The machine is currently running Fedora 18 and I build a custom kernel with a patch for HID and KMS, and a very funny looking X config. This stuff is not any harder to do, in fact building a kernel was easier than back in the day. "make install" will actually put the kernel into grub, throw it in /boot and make an initrd for you.
Of note, switching versions of complex software like X would break your system back then too, just as bad, if not more so. APIs back then were way more unstable, changing from time to time, and upgrading something that had a lot of dependencies would usually lead to breakage back then.
Honestly I'm glad that now people are predominately using stock distro kernels, making things saner in the support realm. It is not beautifully simple to build your own kernel if you don't know what you're doing. There's a huge amassing of various options, subsystems, and drivers that is daunting for someone who deals with low-level system configuration, let alone some new user. These distro kernels are much better for updating, are well-tuned for most applications (most people will not do better in hand-tuning a kernel, but it is possible to do better) and honestly it's not wasteful to use a few extra kilobytes for this or that in a kernel when you have gigabytes of memory.
If you want to go to something that requires by-hand configuration for every component and doesn't have the ability to configure itself to reasonable defaults, be my guest! I'll stick with things that work most of the time, personally.