You need to format the HDD first. This is easy to do and you already have all the tools you need. Boot to the Win98 CD. It will bring you to a menu:
1. Start Windows 98 Setup from CD-ROM
2. Sart Computer with CD-ROM support
3. Sart Computer without CD-ROM support
Choose option #2
The computer will then load the CD-ROM drivers and dump yuo at an A:\ promt.
Here is where you play with DOS
at the A:\ prompt type D: this should bring you to the CD drive(use which ever letter is appropriate
then once at the D:\ prompt type CD\Win98 this should bring you to the Win98 directory on the CD
then type Format C: this will run the format utility on your C: drive, once again you the appropriate letters.
then when format is complete, restart, boot to the CD, choose option 1, and Windows will install to a clean HDD