I thought I already replied to this, but I don't see it here so forgive me if this shows up twice:
You can create a dos partition and use a win98 startup disk with an external cd drive. Copy the win98 dir to your hdd and run setup from there. You may need to include himem.sys in your config.sys in order for it to run. You can also try a pre-installation boot cd like BartPE to create your own install cd, although it's not worth it if you are ging to install Win98.
Why not try Win2000, XP, or XP Tablet. I've installed all of these successfully. I did try to install Win98 on mine, but it crapped out during the setup. If you do try Win98, make sure you have it selected as the OS in the bios.
Hope this helps.