I had a similar problem with a laptop.
Installed a new HD then purchased a caddy to put the old drive in, accessing it via the PC-Card slot.
Win98 kept freezing & then reporting that the device caused it and Win98 would never access the device again.
Finally realised that the old disc still had a partition set as 'active', causing a conflict between the new disk's active partition and the old disk's active partition. Win98 will only accept a single active partition.
Removed the 'active' status from the old HD & now it works properly.