Very simply, the Win98 disc should have a method of creating the bootup disk that you require (although the system might complain about retrofitting)
Please note this requires a fresh install CD (OEM) not an Update one (95 > 98)
You might need to checkout
www.bootdisk.com to get a win98 bootdisk, however if you get a diskette setup, you will have the power to deal with the NTFS formatted drive.
What you would need to do is loadup the bootdisk, and get it loaded up to commandline.
Once in commandline type "FDISK"
FDISK will allow you to delete the partition, although you will have to check all the information you apply because you'll have to find the "NON-DOS partition" that might show as NFTS or not as the case may be.
You have to remove it, and then generate a new partition for the drive.
[If the drives a large one it could be possible to generate multiple partitions, running at least 3Gb's for the Windows OS and the other drive could then have things installed to, which means defragging is made easier, since you only need apply it to the OS drive. However thats just optional.]
Once you have partition the disk, exit out of the FDISK program, you will be told to reboot.
Reboot it with the floppy in the drive, again load the disk up (it matters not if it has CDROM drivers or not)
Hopefully now you should have a C: drive from the partition you've created, if you don't you'll have to run FDISK again.
If it exists, type "FORMAT C:", this will ask you if you want to format the drive and then once yes is selected (or Y) it will format it into FAT32.
Once the drive is formatted you can then run the Win98 CD to install it on the drive.
Make sure you have a software firewall to install on the system if you intend to deal with the update issues of the OS, as without it your potentially going to have problems downloading the updates through certain DoS attacks that seemed to be run on systems attempting to connect to Microsofts update site.
(This won't be as much of a problem as if you were installing Win2000/XP)
You can run the OS without the updates, but it's advised patching up to help deal with some of the many billions of issues with it.