I think the problems you are having are due to the the
disk manager software you used to set up the disk.
Win98 relies on BIOS extensions to access drives larger
than 8 GB (larger than 512 MB on really old systems).
It sounds as if your machine does not have an Extended
BIOS and your disk manager software somehow does the
same thing for Windows 98.
Linux has its own drivers and does not rely on the BIOS
to access the disk. The Linux driver automatically
supports very large drives. (You have to be careful that
the kernel is under the 8GB mark because LILO uses the
BIOS routines to load the kernel. Once the kernel is
running you have access to your entire disk.)
It sounds as if Linux doesn't understand the way the disk
manager software has laid out the partitions on the drive.
I'd say you have two options (1) see if Linux is compatible
with your disk manager software or (2) don't use the disk manager
software, limit Win98 to the lower 8Gb, let Linux have everything
above 8Gb (set aside a small 20M partition below the 8Gb mark
for /boot).
Tony