Can’t install programs

My Win 98 PC (P2, 6gB free disk space, 320mB RAM) is refusing to install a number of programs (which are W98 certified).

The message I get is :

Setup Initialization Error
Setup is unable to find a hard disk location to store temporary files
Please make at least 891kb free disk space available and then try running setup again
Error 101

Any clues?, I can email the system info file if requested. I have run Virus scan and a throrough ScanDisk with no abnormalities detected.