What they did is stop attempting to patch security leaks. It wasn't possible to fix all of them anyway. They still offer all the previous patches. If you want real security, you'll use a LINUX firewall ahead of your Windows network.
I use a router with a built in firewall.
Yes you can use their existing patches, but it's not as easy to do as with Windows 2000. Service Pack 1 of Win98 included IE 4. If you made a clean install of Win98, you'd have to install the original with IE 3; reboot several times; install SP1 with IE 4; reboot; install IE 6 SP2; reboot. With Windows 2000 you can update the original installation disk to apply all the service packs. I did a clean reinstall on a dual P3 Dell with Windows 2000, and it took much less time than having to install all the updates separately.