Did you try the troubleshooting steps list here by microsoft
Windows 98 Starts in Safe Mode
If Windows 98 starts in Safe mode, step through the startup process to see if any devices do not load properly:
Click Start, click Run, type msconfig in the Open box, and then click OK.
Click Selective Startup.
Try different boot options. The following table lists several startup options. The options are labeled Boot A, Boot B, Boot C. To use a boot option, click the appropriate check boxes to select or clear them. Follow the instructions below the table to determine the cause of your problem.
Boot A Boot B Boot C
------------------------------------------------------------
Process Config.sys file Yes No Yes
Process Autoexec.bat file Yes No Yes
Process Winstart.bat (if available) Yes Yes No
Process System.ini file No Yes Yes
Process Win.ini file No Yes Yes
Load Startup Group items Yes Yes No
NOTE: The Msconfig tool cannot disable a file that has the read-only attribute, although it behaves as though it can. To determine if the Msconfig tool has replaced the file you are attempting to disable with a copy of the file, text similar to the following text should appear at the beginning of the file:
rem
rem *** DO NOT EDIT THIS FILE! ***
rem
rem This file was created by the System Configuration Utility as
rem a placeholder for your AUTOEXEC.BAT file. Your actual
rem AUTOEXEC.BAT file has been saved under the name AUTOEXEC.TSH.
rem
NOTE: If Windows 98 does not start normally under any of the following scenarios, see the "Troubleshooting Protected-Mode Driver Problems" section later in this article.
First, try the Boot A option. If Windows 98 does not start normally under these conditions, try the Boot B option. If Windows 98 does start normally using the Boot A option, there is a problem in the System.ini or Win.ini file. To find which line in the System.ini or Win.ini file is causing the problem:
Click Start, click Run, type msconfig in the Open box type, and then click OK.
Click the Win.ini tab.
Double-click the Windows folder.
Click to clear the load= and run= check boxes.
Click OK.
When you are prompted to restart your computer, click Yes.
If Windows 98 starts normally using the Boot B option, there is a problem with a driver or terminate-and-stay-resident (TSR) program being loaded from the Config.sys or Autoexec.bat file. See the "Troubleshooting TSR Problems" section later in this article.
If Windows 98 does not start normally with the Boot A or Boot B options, try the Boot C option. If Windows 98 starts normally using the Boot C option, there is a problem with a program that is run during startup. See the "Troubleshooting StartUp Folder Problems" section later in this article.
If you are still unable to start Windows 98 normally, use the System File Checker tool to check for damaged or replaced system files. To start System File Checker, click Start, point to Programs, point to Accessories, point to System Tools, click System Information, and then click System File Checker on the Tools menu. For information about how to use System File Checker to extract a file, please see the "System File Checker Tool" section of the following article in the Microsoft Knowledge Base:
Q129605 How to Extract Original Compressed Windows Files
For additional information about System File Checker, click the article number below to view the article in the Microsoft Knowledge Base:
Q185836 Description of the System File Checker Tool (Sfc.exe)
If you are still unable to start Windows 98 normally, see the "Troubleshooting Protected-Mode Driver Problems" section later in this article.
http://support.microsoft.com/support/kb/articles/Q188/8/67.ASP
