Thanks guys for all these suggestions, but still getting nowhere.
Firstly, fedto and legend2b4, the first thing I did was run a full scan on the hard disks. I've got Drive C, D and H (compressed drive).
The 2nd thing I did was run a diagnostic program - it's only an evaluation copy so it keeps dropping out on me however it reported that the hard disk was fine, so was CDROM and everything else I checked. So in my own mind I had eliminated hardware faults and decided it was a corrupted registry (as per the error message).
This is an upgrade from Win95 and so the attempt to reinstall Win98 upgrade runs into trouble when trying to read the system registry.
The CDROM is not found with the Win98 startup disk. But it is found with the boot disk and with the Win95 startup disk and with my diagnostic disk. So this is why I was hesitant to start fiddling with the BIOS, legend2b4.
gargouille, it has taken me some time to find my old DOS book with the instructions on xcopy, so I'm trying to copy some folders across to the 2nd HDD in the assumption that eventually I'm going to have to wipe C: and start again. I'll have a go at that attrib thing too.
If that doesn't work, I guess all that's left is to reformat and reinstall Win95 and then Win98.
Or I could drop it from a height ..... %-)