You could try booting to DOS. Then copying the files from the 98 install CD to the HDD in a folder. Any will do.

Then boot to dos, cd to the folder, and run the setup.exe or install.exe (* I forget which it is), and it might install 98 over the existing installation using the HDD. This would eliminate 2 issues that might cause the hang, 1 the CDROM and two the 98 disk itself.