Not all 98SE cd's are bootable. Check the root directory of the cd for these files;
Command.com
IO.sys
MSDOS.sys
Drvspace.bin may be there also, but this file is not really required for booting, but the other three
are.
"I can start it with a boot disk go to the cd-rom \ windows \setup..."
What bootdisk are you using? If required, you can get a 98SE bootdisk image file
here or
here. You click on the downloaded file to create a bootdisk on one of your floppy disks.
Did you mean
%CDROM%:\win98\setup.exe by the above path statement?
"...... but get the message cannot run in dos mode"
Exactly what does it say on the CD label that you're attempting to use? Any of the MS O/S's up to 9x/ME use DOS for the setup execution.