|Did you partition it in the computer it's in now? Sometimes one bios will see a drive a little differently than another.|
Is the cdrom on the same data cable as the hard drive? Is the hard drive identified correctly in cmos/bios setup?
It's pretty much got to be the ram, cdrom, cd or the hard drive. Yet you seem to have eliminated each of those as a cause.
You could try copying the installation files to the hard drive and then running the installation from there. Just copy the contents of the WIN98 directory on the 98 disk (WIN95 for 95) to a similarly named folder on the hard drive and run SETUP from there.