I'm not entirely sure how accurate this is, but I know Window 98SE cannot handle anymore than 512mb of ram; if your computer is totalling this and your graphical ram capabilities, this could be a reason.
But again, I cannot be certain.
You should upgrade your OS anyway. Your specs are wasted on 98SE.
I did. I have a similar setup. I choose Windows 2000Pro. Its great, and thankfully, familiar in GUI.
Hope this is a useful avenue of investigation.