Is the drive new? I realise the Win 98 set up does a disk-check, but it might be worth running a manufacturer's diagnostic on it.
If you can access the drive after the problems but before you format ready for another go, look for Setuplog.txt in C:/ - it may reveal what went wrong.
Hi Brundle
The drive is not new and was working ok under x/p pro. I have done a low level format overnight and tried loading win98 again, but still run into the same problem. I am now wondering if there is a hidden partition containing the x/p pro system recovery files, which is unaffected by the low level format and is affecting the loading of win98.
Setuplog.txt just produces Bad command or file name.