After you click 'OK' when the error You must reinstall Windows, then the .dll error comes up, right? Or vice-versa.
Try replacing the Msvcrt.dll file with a new copy from the Windows CD. To do this:
Restart the computer with the Windows 98 Startup disk. At the Microsoft Windows 98 Startup menu, type 1, and then press ENTER. Record the drive letter assigned to the CD or DVD-ROM drive.
Type ext, and then press ENTER to start the Microsoft Extract Command Line Helper. At the Please enter the path to the Windows CAB files (a:): prompt, type drive:\win98 (where drive is the drive letter that you recorded in step 3), and then press ENTER.
Note: Depending on your installation of Windows, the Windows .cab files may also be stored in the \Windows\Options\Cabs folder.
At the Please enter the name(s) of the file(s) you want to extract: prompt, type msvcrt.dll, and then press ENTER.
At the Please enter the path to extract to ('Enter' for current directory): prompt, type c:\windows\system, and then press ENTER.
At the Is this okay? (y/n) prompt, type y, and then press ENTER to extract the file to the specified directory.
Remove the Windows 98 Startup disk, and then restart the computer.