Have you tried to copy the Windows 98 install files to the hard drive?
Boot off a floppy that loads the cd-rom drive in dos mode, then copy all the files to the hard drive in a directory, then install Windows from the hard drive in dos.
If you need a boot disk to load your cd-rom drive in dos mode, try
http://www.bootdisk.com (I espically like the Windows 98 SE boot disc with generic cd-rom driver).
After you install the os from the hard drive, create a directory in windows (call it anything you like) then copy all the cab files only from the setup directory on the cd.
Then alter the registery to point to the setup files, windows will never ask for your windows cd again
- Here's the register hack information:
http://www.winguides.com/registry/display.php/42/
This is what I do with Win9x installations. Then I throw on Windows 95/98 Plus on top of it, do WindowsUpdate, then apply the "UNOFFICIAL Windows98 Second Edition Service Pack 1.6.2" from
http://exuberant.ms11.net/98sesp.html if I'm using Win98SE. If your using Windows ME, check out the patch list from Tech Spot OS Updates