I've had the same sort of problems with Win98. I would agree with Vorlin about most of this.
I've found Standby mode completely realiable if you set it up the way he suggested (no screen saver, and with disk drives in power management properites set to never in the "turn off hard disks" option). On a desktop PC this means that your monitor will switch to power saving mode, and also any buffered data will be saved to your hard drive, so that if you have to restart, you will not loose any data. I think this is slightly better than letting a blank screen saver kick in, as entering Standby mode ensures you won't loose any data.
I believe the problem with hard disks is a timing issue, to do with windows locking the drive when it is shutting down conflicting with the hard drive being spun down. And the time a hard disk is most likely to fail is when it is spun up to full speed, so shutting them down on a desktop PC is a false economy.