nih,
Yes, you will need the jsdk2.1 or a full Enterprise IDE software like JBuilder, Visual Age, etc. to develop Servlets.
jsdk2.1 can be downloaded free from Sun. I did have some problems running it with jdk1.3 on a Windows 2000 machine, but No problems with jdk1.2.
The startserver command file does not work on Windows 98 unless you modify it.
When I read the jsdk2.1 install instructions from SUN, I had know problems getting it running on a Windows NT system.
Good luck,
Brian