well i used IE6 for about a year and a half with win98se...
trick is se IIRC. not 98 patched.
you can get an exe to create a win98 boot disk from
http://www.etplanet.com (WARNING there some non child friendly things burried on that site... but some useful resources like the boot disk things.)
as far as "fixing" win98... its tough. i found it easier to re-install.
just a quick question... when youi are at the "blank desktop" what happens if you hit the windows key? does the start menu appear?
if so goto programs/accessories/system tools/system information
if you get that to run there is a system file checker that can possibly repair some files.
man i JUST upgraded to XP otherwise i could work though some ideas (i work better actually "doing" it).
like i said i just upgraded... might sell yas my win98se for $20 if it comes down to that lol.
you might try and find a copy of norton system works....
if you get to the "blank desktop" and put a CDrom in does it autostart? you could run "win doctor" from the CD that way... i found that program invaluable to keeping win98 running properly.
good luck sir.