Maybe you have too much RAM. Win 98 sometimes has trouble with over 512 MB of RAM. Check this link
It seems to have to do with your problem:
If a computer that is running any of the versions of Windows that are listed above contains more than 512 megabytes (for example, 768 megabytes) of physical memory (RAM), you may experience one or more of the following symptoms:
* You may be unable to open an MS-DOS session (or command prompt) while Windows is running. Attempts to do so may generate the following error message:
There is not enough memory available to run this program.
Quit one or more programs, and then try again.
* The computer may stop responding (hang) while Windows is starting, or halt and display the following error message:
Insufficient memory to initialize windows. Quit one or more memory-resident programs or remove unnecessary utilities from your Config.sys and Autoexec.bat files, and restart your computer.
And it tells you what to do about it.