Firstly security in W98se is not really worth the trouble of setting up, as you may have found out all that you need do is click cancel and you are allowed in to the system.
To cancel a user open Control Panel/User and add or delete a user.
If you have already done this then the other option is in the BIOS. Press Delete on bootup and entre the BIOS. Navigate to the Supervisor option to cancel the password.