I just want to clarify, you are trying the 98 install, not the 2000 correct? And you removed the previous NTFS partition and I assume are installing onto a fat32 partition. What stage in setup gives you this error, what steps do you get through before getting the error. Also, the way I used to install 98 was this
Boot using a 98 disk, create my primary partition make it active (using fdisk), then reboot the machine, then format the partition using format.com (if format isn't on the boot floppy then it can be found in the 98 cd under a folder called win98), then I would create a directory in the root of my c drive called win98 then copy all the files from the win98 folder on the cd into this directory then go into this directory and run setup.exe
I did this because anytime windows requires the 98 cd it will already have the cab files and know where to find them so you don't have to enter the disk (assuming you leave the win98 folder in tact after installation)
Also, if you are having trouble finding or using the 98 boot disk go to
www.bootdisk.com they have a nice selection there. I recommend the 98 se disk since it will probably have a compatible atapi driver on it to give you access to the cdrom from dos.
Hope that helps,
kris