The MSCDEX.exe file is used in the autoexec.bat file to set the DOS CD-ROM parameters.
Try running System File Checker (SFC); Go to:
Start / Run and type SFC then hit enter. From there have it scan the system. If it's the first time you've ever run it you'll see some options but the default will work too. If you go with the defaults you'll likely get dozens of stops to just update the entry so it won't stop there again but what you are looking for is a stop where it says "Missing or Corrupted" file.
You run this with the Win98 CD in the CD drive, which from your post seems odd that you can see it unless you're talking about having looked at it on another machine. If that's the case look on your hard drive for a C:\Options\cabs folder where the Win98 CD has been copied and you can restore the file from there.
Now I say all this not having had to extract and restore that particular file so whether it works I don't honestly know but if not we'll go on to plan B.