The two main problems I ran into were 1) software support at the application layer, and 2) video driver support. There is a herculean effort on the part of package maintainers to build software for distros, and no one has been building 32 bit version of software for years, even if it is possible to build from source. There is only a very limited set of software you can use, even CLI software because so many things are built with 64 bit dependencies. Secondly, old video card drivers are being dropped from the kernel. This means all you have is basic VGA "safe-mode" level support, which isn't even fast enough to play an MPEG2. My final try was to install Debian 5, which was period correct and had support for my hardware, but the live CDs of the the time were not hybrid so the ISO could not boot from USB. I didn't have a burner so I finally gave up.
So I think these types of projects are fun for a proof of concept, but unfortunately are never going to give life to old computers.
Start with a conventional MBR and active FAT32 partition, and make sure it will boot to MS-DOS, this only requires the 3 DOS OS files to be present when the bootsector is a DOS bootsector (which seeks IO.SYS).
Once that's done, then (optionally) copy the DOS bootsector to a file on that FAT32 volume, name the (512 byte) file BOOTSECT.DOS. A disk editor can do this, or carefully use dd in Linux.
I then boot to Windows and use its CLI to run SYSLINUX.EXE (v6.03 on virgin media), to "Syslinux" (verb) the FAT32 volume. You can alternatively do this from Linux. This replaces the DOS bootsector with a Syslinux bootsector that will seek a Syslinux folder instead of seeking IO.SYS. Also writes ldlinux.sys and ldlinux.c32 to the FAT volume.
You do have to be consistent with your Syslinux version, the .C32 files in use must be from the same version of Syslinux that you use to "Syslinux" the FAT volume. And must match the version of Isolinux used to make the ISO. To find out which version of Isolinux was originally used on the ISO, open the ISO in a disk editor and these have big sectors but about the third sector down will be some readable text with the Isolinux version number.
Then copy all the files & folders from the mounted ISO to the FAT volume, change the name of the isolinux folder to syslinux, in the syslinux folder change the name of isolinux.cfg to syslinux.cfg.
A properly prepared distro distributed in ISO form should then boot normally the way it is intended when stored on a FAT filesystem instead.
Show-stoppers can still arise when some live distros have .CFG bootstrings within their Isolinux folder that specify CDROM or other hardcoded deficiencies, for USB you can sometimes specify REMOVABLE after you change the foldername to Syslinux. You can also specify a chosen volume in case it's not picked up by default.
You may need to look at every .CFG file in the Syslinux folder, they are all usually linked, ideally there is only syslinux.cfg but some people make it more complicated than that. Back them up before editing but they are just text files.