You can bung MS OS's in /dev/hda1, /dev/hd2, or /dev/hda3. Technically, it would also work in /dev/hda4, but chances are that if it exists, it'll contain your extended partition.

I think Win'95 should be able to co-exist with WinME, I've got Win'98, WinME and RedHat on the same hard disk. You can add Win'95 to the LILO boot menu from within X. Whether it will boot correctly or not is another question, since I don't know if LILO changes the active partition when you choose a different OS - that's something I haven't tried since LILO isn't my boot manager.