The bahaviour described could be caused by a virus. About a decade ago there was a family of viruses called "barrotes" which caused vertical bars to appear in DOS windows. It's not your problem - I mention it only to verify that viruses have been designed to draw vertical bars on screen.
Certainly the missing dll is more symptomatic of a virus than a hardware problem. If Word launched, looked in a directory for a dll, and couldn't find it, then there are only a few possibilities. You could have inadvertently moved it yourself, an uninstall could have deleted it (shouldn't happen but it sometimes does), a virus could have deleted it or changed its name, or, in rare instances, it could vanish for unknown reasons. Search for the missing dll (Word should name it when it can't find it) to see if you inadvertently moved it. If that didn't happen and if you haven't done an uninstall lately I'd be suspicious of a virus. Why not download Frisk's free virus checker, f-protect, and see if it comes up with anything that McAfee might have missed.
Whether or not you can load Win98 over top of the old one may depend on what Gateway shipped you. Most OEM's cannot distribute the retail version of Windows. Instead they ship a recovery version that will restore your system to the state it was in when you bought it. Check with Gateway.
Assuming it was a virus, and if you are no longer infected, you might be able to just use your registry backup and replace the registry files. See
<a href="http://www.pccomputernotes.com/registry/restoreregistry.htm" target="_blank">http://www.pccomputernotes.com/registry/restoreregistry.htm</a>
However, I would suggest backing up all important files first. At the very least, make a boot diskette so that you can boot to DOS and copy all your files from there, just in case you screw up Windows.