You didn't mentioned if the SCSI is the only drive? I would start by using an IDE drive and seeing if all is ok. I have found that Win98 does not like to boot from a SCSI. I would check this out first by installing an IDE drive. If all is ok with IDE drive then reinstall the SCSI and make sure it is terminated. Read what the Manuf. says about termination. Win 98 does not like me to mix SCSI and IDE drives on the same machine. If the problems continues try different keyboard and mouse. Check outyour SCSI controller. If the controller is built in to the motherboard have it checked out. Check the speed of your SCSI drive you may have to slow it down. You should have a SCSI utility try booting into it and see what the speed of drive is set atand call the Manuf. to check if you should slow it down.
My biggest problems with SCSI drive have been around termination,speed and conflicts with the IDE drive.
Good Luck