|Sorry, missed the bit about the HD space.|
Thinking about it, the chance of putting the folder with W98 onto a flash drive and expecting it to boot are a bit remote. From DOS you only have access to the A and C drives. A boot disk (floppy) allows acces to the CD drive but will not see a flash drive - they didn't exist in those days.
Not sure what you didn't understand but the bits about putting other things on floppies were just some general advice in case your W98 goes egg shaped at some other time. A W98 prepared boot floppy and another floppy with Vmm386 on it can get you out of a whole lot of trouble. I've seen so many posts on here that have got very complicated, and would have been a simple task if the poster had got those two floppies to hand.
Most of the rest was about ways to delete msvcrt which you said you couldn't do in #2. Finally, those W98 files should not have been in use so I was expressing surprise at the system not allowing you to delete msvcrt. It doesn't usually complain about inactive files.
Hope that is now clear.
We all live on the same ball.