Defrag received error “Cannot read C: Dr

I ran a standard Scandisk and then a defrag on my Athlon computer (Win98SE). When defrag was about 50% to 60% completed I received an error message saying “Cannot read C: Drive. To fix the problem run a thorough Scandisk.” I run the thorough Scandisk which I did – detected no errors. I still couldn’t run defrag. Now when I boot the system it gives me the dreaded blue screen saying cannot read c: drive you may loose any files, etc. press any key to continue. After pressing any key over and over it finally boots. However, I continue to get this message even when on the Internet. Do I need to reinstall Windows 98 SE or is there another solution? Thank you for your help.