Technet article Q227040 talks about this error:
CAUSE
This behavior can occur if you install Internet Explorer 4.01 SP2 over Internet Explorer 3.x on a Microsoft Windows 95-based computer, upgrade to Windows 98, reinstall Internet Explorer SP2, and then uninstall Internet Explorer SP2. Doing this replaces many files with the Internet Explorer 3.x versions, which are incompatible with Windows 98.
RESOLUTION
To resolve this issue, reinstall Windows 98 over your existing installation.This replaces the Internet Explorer 3.x versions of files with the Windows 98 versions
Here is the URL to the article:
http://support.microsoft.com/default.aspx?scid=KB;EN-US;q227040
(please remove any spaces)