How old is your motherboard ? If it's more than say, 2 years old, the problem might well be the BIOS that's unable to handle large HDs.
If this is the problem, you have 2 options: getting a new motherboard, or installing a piece of software called a "drive overlay". It basically bypasses the BIOS and thus enables Win98 to use all of the HD. Most major HD manufacturers (IBM, Seagate Maxtor) make drive overlays for their HDs afaik.