I had a similar problem with "Magic the Gathering". The install routines checked the OS version as they did the install.
Its possible there's a registry entry somewhere thats being checked. You could possibly try to find it and change it but I wouldn't hold my breath on that one - besides it may be difficult to find...
What I did was to have a dual boot with Win98 and install under Win98. No problem. Then I found that the game would happily run under WinXP !
Also there are some optionsin WinXP to allow compatibility with Win95 and Win98. I think you set them on the game exe properties page.
If the game absolutely required registry entries (made during the install) then you'd have to hack these across...
Hope this helps,
Cheers,
Tim.