The environment settings for Tomcat on Windows NT platform is done through Control Panel, while the Win95/98 settings are done through autoexec.bat only.
I have set the "TOMCAT_HOME" and "JAVA_HOME" through autoexec.bat on Win98 and tried to start Tomcat, but only received "out of environment space" error. It is not reproducible on NT, though.
I've checked the "tomcat.bat" file and isolated the problem to the following block:

set CLASSPATH=.
set CLASSPATH=%TOMCAT_HOME%\classes
set CLASSPATH=%CLASSPATH%;%TOMCAT_HOME%\lib\webserver.jar
set CLASSPATH=%CLASSPATH%;%TOMCAT_HOME%\lib\jasper.jar
set CLASSPATH=%CLASSPATH%;%TOMCAT_HOME%\lib\xml.jar
set CLASSPATH=%CLASSPATH%;%TOMCAT_HOME%\lib\servlet.jar
set CLASSPATH=%CLASSPATH%;%JAVA_HOME%\lib\tools.jar

When it is executed, the second-to-last line was totally ignored. I assume there is a limit of # of characters to put in CLASSPATH settings for Win95/98.
If I put everything in a single line, all were ignored.
Look at the second line, wouldn't it be:
set CLASSPATH=%CLASSPATH%;%TOMCAT_HOME%\class ? Otherwise you lose logic to put in the first line.
However, if I do so, the last two lines will be ignored.
If I use a Command Prompt and manually enter the above lines, they will be accepted, but it seems to have done no good to the Tomcat environment.