Yes, the Amiga is an older, simpler computer. It was much easier to make an OS stable when it only took up 256k of space. Of course, Windows does much more than AmigaDOS ever did, so of course it's bigger.
When people start whining about Windows being bugged, that 95% of the time it's "pilot error" [thats a nice way of saying the user screwed up] and 5% of the time it's "hardware error". <1% of the time is it "Windows error".
By pilot error I mean: screwing around with things you shouldn't be touching (registry/.ini settings, or **installing beta software**)
I have 3 machines. 1 runs Windows 2000 Professional, the others run Windows 98. The Windows2000 box IS my MAIN machine and has locked up on me ONCE in the past year when using some beta software. The Win98 boxes only lock up on me when running beta emulation software. I don't get sudden spontaneous blue screens of death, but then again, I don't have a gazillion 3rd party programs running in the systray. I don't have any beta device drivers installed. Beta = asking for trouble.
A lot of people complain "windows SUCKZ it crashes all the time". What these people don't realize (or choose to ignore) is that Windows is only a part of what's running on your system: applications and 3rd party device drivers all have the run of your system (ESPECIALLY on Win9X). If a device driver or app hoses your memory space, Windows is going to try to stop it, but quite frankly the memory protection model of Win9X isn't very good. Once a program starts trashing system memory, forget it. No OS on the face of the planet can keep your system up once its internals are hosed, not LINUX, nothing. NT/2000 is much better with regards to this, since they are better about protecting undeclared space.
I'm sure that we can all agree that if it weren't for the fact that anyone can create a PC system, they would still cost multiple thousands of dollars to purchase. We can all agree that MS took far too long to drop 16-bit compatibility, DOS baggage, and get a unified hardware abstraction layer. But even MS learns from its mistakes, and improves its software.
While Win9X does have DOS installed (it needs it for the DOS compatibility boxes/reset to DOS mode) I can assure you that the windows kernel and device drivers do not do ANY DOS calls WHATSOEVER (unless you run a program in the DOS box, in which case most DOS calls are trapped and emulated). The 8.3 filename you see is baggage left over from DOS - you don't ever need to use 8.3 filenames inside Windows programs. It's there for the DOS box. Want proof? Boot up WinNT or Windows2000 and use NTFS, not even a whiff of DOS on that installation. The flag you mention simply tells the computer not to boot Windows up. It is not proof that Windows is built on DOS - that era ended with Windows 3.X. The FAT32 driver is DEFINITELY not a DOS driver (the DOS FAT32 driver doesn't support long filenames).
Also, your perceived memory requirements are kind of insane. 512mb of RAM is only needed if you're going to be doing stuff like Image editing, or running Windows 2000 Advanced Server. You really need 192mb with current software. More is always better, but your system will be adequately functional with 192mb.
Finally, if they were to release a Workbench today for the PC that was competitive with Windows, it would BE Windows. It would be saddled with having to deal with all sorts of different hardware, or it would only work on boxes built by Amiga Inc. (which would cost 3x as much as a normal PC, and the only thing you could upgrade would be the processor or memory).
And if you crave stability, stop running all those beta programs & device drivers-
* Don't get a bleeding edge ATI video card. Get something like a Geforce instead which has had 2 or 3 years of bugfixing in its drivers.
* Don't get a "noname" soundcard. Actually, as far as soundcards go, at this point in time if you're willing to do without fancy 3D audio, and have an ISA slot, a Soundblaster 16 or AWE32 is the ideal card, Windows drivers have had about 6 years to mature, does stereo 16-bit audio, great DOS compatibility for those old games, etc. The SBLive! still can have issues under Windows 2000.
* DON'T get a "noname" socket-to-slot converter!! DON'T get a generic noname motherboard!! DON'T GET A CYRIX or AMD PRE-ATHLON processor! ALL BIG NONO's IN THE QUEST FOR STABILITY!!!
* TRY to AVOID USB devices if you can. USB is *still* experiencing unpleasant growing pains. The only thing I seriously recommend using USB for is game controllers.
* DO go to Windowsupdate frequently and download the critical updates!
* and finally, if you feel an urge to use beta software remember that even after you've quit out of the software it could still have hosed memory and you machine could quite possibly crash when you attempt something else which accesses the altered data. I can crash my Win9X boxes EVERY time by running EPSXE then quitting out of it using the "close" box on the window (instead of the Exit option in the menu) then trying to run EPSXE again. Remember, its called BETA for a REASON.