You do need to format if you want a clean install, if you install in such a way to keep all of your files and folders, you keep the possible corruption. Partician the drive, you can move files, not programs to the partician, or back up files to a cd, again not programs because all the .dll that execute the programs will be gone. Use the boot up disk for Win98, make sure the bios is set to boot from floppy drive first. The floppy should give you options to start with cdrom support or not, start with cdrom support. you will see an a:\ at the end of bootup,type in format c: it will ask you to confirm and warn you that all will be erased, say yes... If you created a partician that will be drive D, your files will be safe there. I've done this close to 10 times, the partician is safe if you do it right. At the end of the format it will ask you a question, I usually just hit enter. Then you would have the win98 disc in your cd rom, reboot and pay attention to what drive is assigned to the cdrom, then navigate to the cdrom, after bootup you will again have a:\, because the floppy is still in, type, c: you are now on the c drive, type in the cdrom designation, d if no partician, so d:\win98
then you should be there, type setup.exe and it should load from the cd. There may be shortcuts, but this is what I know. have fun.
PS, I know people that have reloaded windows without a complete format, their problems weren't fixed.