To install Windows 98, you need to boot from the floppy drive using a startup disk. Then, select the "Enable CD-ROM" support.
You can download the files to create a boot floppy
Here. Just download and extract to the desktop, then copy the contents of the folder onto the floppy. Then, reboot the system and it should boot directly to the A:\ floppy.
To format the drive once you have the floppy setup and whatnot, you will see "A:\> and you just type "fdisk" (without quotes) and delete the first partition on the HDD (if you don't have anything on there you need). Thenm create a primary partition and an extended partition. Then, exit FDISK and reboot using the floppy again. Enable CD-ROM support and then when "A:\>" appears, type "D:\" (without quotes) and then type "Install" and the rest is easy! Just follow the instructions.