Since the standard WIN98 boot disk wouldn't pick up the USB CD drive, I had to use a modified boot disk. That's what caused the false hard drive size. After starting with the modified boot disk, I couldn't use a flah drive, as T-R-S suggested, because I only have one USB port. (It's being used by the CD drive) Instead, I created a directory on C: and copied the WIN98 folder from the Install CD to the new directory. I then rebooted with the standard WIN98 statup floppy, and installed WIN98 from the hard drive
Eureka it worked!