Win2000 recognized that you had Win98 installed. It should have prompted you to select upgrade or to configure a dual boot. The "dual boot" option was used and that's why you now have two partitions on your hard drive: one with Win98 and the other with Win2K.
To be honest, that's a good way to go especially if you have enough hard drive space. Upgrading from one operating system to another is generally not recommended to avoid registry problems that might cause some apps not to work.
If you really want to have Win2000 installed on top of Win98, then you'll need to use the fdisk command at a DOS prompt. This will give the option to select a partition to delete. Make sure you display the partition information first to see which one you need to get rid of.
After that, you will also need to delete the boot.ini file on your C: drive before you try to install Win2000 again. Make sure you are running the installation while Win98 is up and running.
Hope that helps...
~cdogg