The 8GB barrier is a limitation with older systems and there are a couple of work arounds.
FIRST, MAKE SURE YOU ARE ENABLING "LARGE DISK SUPPORT" WHEN USING FDISK. It should prompt you for this and you should choose YES.
1.) Flash your BIOS to the latest revision. Your board manfacturer should have the latest BIOS available for download. This is recommended only if you understand the consequences.
2.) Use drive installation utilities to break the 8GB barrier. WD & Maxtor always come with drive installation tools which "trick" the BIOS into recognizing the whole drive.
3.) Purchase a PCI UDMA controller. This is a PCI card that adds additional IDE channels to your computer. The card works independantly from the BIOS, meaning it can address larger sizes even if your computer does not support it.
Something else to consider is that once you break the 8GB barrier, then you have to find a way to get past the 32GB barrier. LoL. You really should not have installed such a large drive in such an old system. Hopefully doing the above will also get you past 32GB as well.
The next one after that is 137GB, so you shouldn't have to worry about that one.
As for your Windows 98 locking up, it could be due to your drive not being properly installed. It could also have something to do with MANY MANY different things. Can you give us some more information? How about safe mode.. Does it boot into safe mode?