Laptop hard drive problem ( i think )

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Hi Guys, i hope anyone can help me out there with this mystery...I was given a laptop with the comment, if you can fix it you can have it..what a challenge, so i went for it, wish i hadn't now.
Its a IBM thinkpad 240 2609 with an external fdd and external usb cd/rom drive. It had win98 loaded on to it and the origional problem was everytime it was booted up, it would get to the win98 bootup screen and show a message not enough room to continue....it would then go off and reboot again and again still with the same message...so i thought i would go into safe mode and see if i could rectify it...to no avail....couldn't load tools from a usb cd rom in safe mode...so i decided the best way was to clean it off and load windows again...Did all the right things about partioning making it active on a fat 32 system..formatted endless times..it shows 100% available disk space as 11507mb..everything went ok until i tried to set up....went to my cd/rom drive letter and typed setup..and the message i keep getting is.."windows setup requires executable program size to be at least 442368 bytes to run".....i investigated this in microsoft help and it said it was either a virus....it couldn't be that it has not been used on the internet before...or you have a hardware problem....i have partioned the drive in many ways...fron splitting into logical drives and all sorts but it is still giving me the same message...the cd/rom drive is working ok because i copied the instal files from the win98 disk into the hard drive....even tried setup from there but still the same message...can anyone please help me with this...as i've not got a lot of hair left to pull out.....Regards ...Ken
 
Looks like the setup doesn't have enough memory to run.
When you boot into DOS to run setup, make sure you do it with extended memory (load himem.sys).
 
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