This might be a hardware problem. The fact that the computer use to work right, but now doesn't-- this may result from a hardware item that use to work right, but now doesn't (or is in the process of failing, or a cable came loose, etc). I have fixed similar problems by swapping out a bad modem card for a good modem card, and a bad network card for a good network card. And, in both instances, the solution did not appear directly related to the cured problem. In some instances, the bad device may be an on-board peripheral, which can be disabled from the system BIOS.
Check the system BIOS to see if it is set to halt on all errors. I have my computers set to halt on no errors or only on keyboard errors. Disable any onboard devices no longer needed, such as USB1, serial or parallel ports.
I rarely see errors, and none recently, when running scandisk, much less errors that scandisk fixes, only to have similar errors reoccur. Check the system BIOS to see if the drive is properly setup as autoselect, or, if manually selected, is properly configuered. Then try running the DOS version of scandisk from the "Microsoft Windows 98 Startup Menu". To access the Startup Menu, I hold down the CTRL-key during system bootup. Then select "5. Command prompt only". Then type "SCANDISK /?" for scandisk help. I would be wary of autofixing, or fixing bad sector errors, however, as these may be false positives.
You may also want to use the "Microsoft Windows 98 Startup Menu" to check and repair the Windows Registry. Select "5. Command prompt only". Then type "SCANREG /?" for scanreg help. Type "SCANREG /FIX" to repair and compact the Windows Registry. Run a reliable registry cleaner from Windows, such as ccleaner, before running SCANREG from DOS.
Also use the "Microsoft Windows 98 Startup Menu" for step-by-step-confirmation during bootup. You may be fortunate enough, using this procedure, to identify the point when bootup fails.
Boot to Windows, and run "msconfig" from the "Run" prompt. Disable all start menu items, not related to Windows (firewall, antivirus, etc). Reboot and see if the booting problem goes away.
You appear to have installed and since removed one of the unofficial service packs for Windows 98. Since these updates appear essential to a stable Windows 98, and updates no longer appear to be available from Microsoft, I recommend you reinstall one of these unofficial service packs. My recommended service pack(which I have used myself, exclusively and with excellent results, for several years) is "Unofficial Windows 98 SE Service Pack 2.1a" (available from several sources, including http://www.softpedia...vice-Pack.shtml