Although it's not recommended, you can install SE over FE. Don't delete the windows directory though!!! After reinstalling the OS make sure you reinstall your drivers, especially your video and DirectX if you play games...
EDIT: I would also find a way to copy Win98's cab files to your hard drive. The way I did it was install 98Lite and during it's installation that will copy the cabs to your disk. This can be important in case Windows does not correctly detect your IDE channels and can't access your CD-ROM once you get into the final phase of the installation... (that happened to me once)
Remember, if you are going with 98lite do it with before you install 98 SE...